aside OOPS! GOP Figures Out That Their Rushed Through 2017 Tax Bill Needs Fixing

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Remember how there were glitches in the 2010 Obamacare bill / the Affordable Care Act passed by Democrats by a straight party line vote in the US Congress, that occur in any roll-out of a large sweeping new legislation. Over the years, the democrats were never able to enlist enough republican support to make the technical fixes that any new law requires.

Now, the shoes are on the other foot. Only this time, the 2017 tax cuts bill was much more rushed in the development process than Obamacare when it was pushed trough in December with only republican support. The fixes that will be required are numerous but any changes will now require democratic backing. Because the passage of the 2017 GOP tax bill was managed as part of the reconciliation process, only 51 republican votes were needed. But for any changes, republicans will be looking for at least 9 democrats for assistance to add up to the 60+ votes, necessary for passage.

This will get interesting.

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Here is the rest of the story… 

On March 11, 2018, Jim Tankersley and Alan Rappaport of the New York Times penned the following report, “G.O.P. Rushed to Pass Tax Overhaul. Now It May Need to Be Altered.”

Excerpts:

“The legislative blitz that rocketed the $1.5 trillion tax cut through Congress in less than two months created a host of errors and ambiguities in the law that businesses big and small are just now discovering and scrambling to address.

“Companies and trade groups are pushing the Treasury Department and Congress to fix the law’s consequences, some intended and some not, including provisions that disadvantage certain farmers, hurt restaurateurs and retailers and could balloon the tax bills of large multinational corporations.”

Photo credit: Ken Cedeno/Bloomberg News

“While Treasury can clear up uncertainty about some of the murky provisions, actual errors and unintended language can be solved only legislatively — at a time when Democrats seem disinclined to lend votes to shoring up a law they had no hand in passing and are actively trying to dismantle.”

“On Thursday, the U.S. Chamber of Commerce sent the Treasury Department 15 pages of detailed requests for clarification on how the law affects multinational corporations, mutual fund investors and mom-and-pop pass-through entities.”

“It was a public display of the lobbying that businesses are waging primarily behind the scenes to change or shape enforcement of the law, most notably its byzantine new provisions intended to crack down on multinationals sheltering profits abroad for tax purposes.”

THOMAS J. DONAHUE /Brendan Hoffman for The New York Times

“Dana Trier, who left the Treasury Department last month after serving as deputy assistant secretary for tax policy during the drafting of the bill (said) “The mistakes or unintended consequences for this or that group won’t show up for months.”

“The result could be a tax-theme replay of the years after passage of the Affordable Care Act, when Republicans refused to cooperate with so-called technical corrections legislation, and a Democratic administration was forced to push the limits of its authority to address concerns in the enforcement of its signature policy accomplishment.”

“Among the problematic portions to emerge so far is what has become known as the “grain glitch.” A late change to the legislation altered a deduction for United States production in a way that permitted farmers to deduct 20 percent of their total sales to cooperatives — agricultural organizations owned by groups of farmers that operate for the benefit of their members.”

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“This allows farmers to deeply reduce their tax bills, but it has caused an uproar among independent agriculture businesses that say they can no longer compete with cooperatives, since farmers would choose to sell to cooperatives to take advantage of the more generous tax break.”

“The conservative Tax Foundation said that the flaw should be addressed quickly, saying that, if left in place, “the deduction would allow some farmers to effectively become tax-exempt.”

“Leaders of independent grain companies from Oklahoma, Minnesota and South Dakota traveled to Washington in late February to make their case to lawmakers that a fix was urgently needed, warning that businesses like theirs could collapse or be sold.”

“We will be much more receptive to selling our business if this happens,” said Todd Lafferty, co-chief executive of Wheeler Brothers Grain Company in Watonga, Okla. “It’s going to result in further consolidation of the industry, but that’s not what we want to do.”

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The feed storage area at Dakota Mill and Grain. CreditKristina Barker for The New York Times
“Mr. Lafferty, a Republican, said he was excited about the new tax legislation until he heard about the provision. Despite the other benefits of the law, he said, he would rather be governed by the old tax code than face a competitive disadvantage to nearby cooperatives.”

Thomas Lien Jr., of Dakota Mill and Grain in Rapid City, S.D., said that he already regretted the $20 million investment his business made last year to build a shuttle loader grain elevator for moving large quantities of grain because farmers were now only interested in selling to cooperatives. Now he wondered how his business and others like it could survive.

“It’s going to drive investments in rural America away,” Mr. Lien said. “We can’t compete.”

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“Restaurants and retailers are also concerned about a drafting error that will mitigate the tax benefits they receive when renovating. The law was supposed to simplify depreciation rules for businesses making renovations or other property improvements so that they could deduct these expenses over 15 years. Because of a mistake in the writing of the bill, the cost of these investments must be deducted over 39 years, diminishing the intended benefit.”

“The top lobbyist for the restaurant industry said that she was hopeful that lawmakers had heard their complaints.”

“It is our understanding that it was an honest mistake,” said the lobbyist, Cicely Simpson, the executive vice president of public affairs at the National Restaurant Association. “The bipartisan intent behind the law was a 15-year depreciation period, and we are confident Congress will have this resolved quickly.”

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“But legislative fixes will be tough. Unlike the original tax bill, which passed along party lines, legislation correcting any portion of the tax bill will require Democratic votes to get through the Senate.”

“The law passed Congress via the budget reconciliation process, which bypassed a Senate filibuster and enabled Republicans to approve it on a party-line vote in both chambers. A fix-it bill would need at least nine Democrats in the Senate to join Republicans.”

“I’m willing to make technical changes, but they have to be substantive, too,” said Senator Sherrod Brown, Democrat of Ohio and a member of the Finance Committee. “We’re not just going to sit down and fix the things they did badly because they did it in the dead of night with lobbyists at the table.”

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“A second, much larger group of issues are those that need Treasury clarification — areas of the law that companies say could be construed in any number of ways, with vastly differing consequences for tax liabilities.”

“That includes questions over which businesses, and what types of business income, qualify for a new 20 percent deduction for so-called pass-through entities, whose owners pay taxes on the companies’ profits through the individual code. For example, the Chamber of Commerce is pushing to ensure the deduction applies to investors in mutual funds that own stakes in real estate investment trusts.”

“It also includes a dizzying number of concerns over the new system for taxing multinational corporations that the law created.”

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Dakota Mill and Grain in Rapid City, S.D. Mr. Lien wondered how his business and others like it could survive given the so-called grain glitch in the tax bill. CreditKristina Barker for The New York Times
“Those corporations are upset over the possible scope of two provisions that collectively form a sort of alternative minimum tax for companies operating in the United States and overseas. The bill’s architects pitched those provisions as a means of cracking down on companies that shift profits to foreign parent companies or subsidiaries to avoid American taxes.

“But affected companies say they fear the legislation could be construed overly broadly by officials at Treasury or the Internal Revenue Service, subjecting activities that those companies do not consider forms of profit-shifting to the minimum tax.”

“A Chevron executive called one of the minimum tax provisions “a disaster”last month at a public forum. At the same event, an Eli Lilly official said the provisions discouraged companies from holding intellectual property in the United States, counter to the intent of Congress, because they forced those companies to reimburse foreign affiliates doing work outside the country.”

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MCCONNELL/ HATCH/ MNUNCHIN

“Many companies are looking to Treasury to resolve those concerns. The U.S. Chamber of Commerce’s list of requests includes several suggestions for ways the department can limit the minimum tax’s reach.”

“Republican lawmakers who wrote the bill, however, are not looking kindly on efforts to change the intent of the law. Their staff members say they have asked businesses to make a data-based case for why their proposals are necessary.”

“I stress the importance of carrying out legislative intent,” Senator Orrin G. Hatch, Republican of Utah and the chairman of the Finance Committee, wrote in a letter last month to Steven Mnuchin, the Treasury secretary. The intent, he added, was to remove “damaging tax-base erosion found in the former tax system” — a reference to eroding the tax base of the United States by shifting corporate profits abroad.

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Rohit Kumar

“Rohit Kumar, a former Senate leadership aide who now leads a tax policy group at the accounting firm PwC, said turmoil in the first months of a new and sweeping law was to be expected. “Everyone needs to stop and take a deep breath,” he said. “This is normal, against the magnitude of the change.”

“Still, companies that want change will undoubtedly continue pressuring Congress, Treasury and the Internal Revenue Service, Mr. Kumar said.”

“Nature favors the bold,” he added. “I suppose you could just sit back and wait, but a better strategy is to be engaging with Treasury and I.R.S., and engaging with the Hill.”

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“David J. Kautter, the acting commissioner of the Internal Revenue Service and Treasury’s assistant secretary for tax policy, said last month that the agency had a detailed plan for introducing clarifications and, when possible, fixes to the legislation.”

‘Republicans and lobbyists say they are optimistic that Congress will act soon on at least the grain glitch. Some lawmakers have been musing about stuffing more fixes into a big, must-pass spending bill expected this month.”

“But that bill would require the support of the Democratic Party, and could give it an ability to demand something in return — such as rollbacks of limitations on state and local tax deductions, which primarily hurt taxpayers in liberal states.”

5 comments

  1. Gronda, this is not surprising. As with any rushed legislation, flaws had to exist. Tax law is complex – smarter people took longer when the last overhaul took place. The ACA was less rushed and vetted more, but it also had flaws. The ACA repeal and replace builds over the summer were far worse.

    Here is what needs to happen. Dems need to say we will help with tax fixes if Reps help with stabilizing the ACA.

    Keith

    • Dear Keith,

      You and I are on the same page. Republicans will have to work with the democrats to fix ACA first or no cigar. Turnaround in this case is what the republicans deserve.

      We could have told them, this was coming.

      While we’re at it, how about DACA as well.

      Hugs, Gronda

  2. To rush tax law will always cause problems because every word counts.
    Eg: Back in the pre-computer times in the UK for an employee to claim expenses in their work it had to be demonstrated the expenses were ‘wholly, necessarily and exclusively incurred in the performance of the duties of the holder of the office’- translated this meant expenses not by a person in relation to their circumstances but by every employee. everywhere in the UK- no exceptions…and this was an easy example!
    The only way to get a completely fresh tax law is to have three tax free years and build new laws from the bottom up!
    Small wonder GOP have messed it up.

    • Dear Roger,

      Glitches are to be expected in the roll out of any new legislation as expansive as this one. Because of procedural rules in the US Senate, republicans themselves were able to pass the original 2017 tax bill, but this will not be true for any changes.

      This happened in 2010 when the democrats passed their healthcare bill which we call Obamacare. When it came to making the necessary adjustments, republicans refused to help.

      But now the shoe is on the foot. Payback is a bummer. Democrats will help but only in exchange for fixing Obamacare and the DACA program.

      Hugs, Gronda

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