05 Nov

Haphazard tax bill a hazard to Oregon

So Oregon Sen. Ron Wyden, as ranking Democrat on the Senate Finance Committee, went down to the White House recently to talk to the president about the tax overhaul process, accompanied by other Democrats on the committee.

One by one, the other Democrats explained to the president their predictable priorities on the bill: helping the middle class, protecting Social Security and Medicare, not exploding the deficit. And as he often does, Donald Trump told the people talking to him that he agreed with them entirely.

The conversation then came around to Wyden, speaking last, who pointed out to Trump that those were not the positions taken by the administration officials working on the bill.

Trump looked around at Secretary of the Treasury Steve Mnuchin and chief economic adviser Gary Cohn and told them to fix it.

And later in the week, Trump jovially declared that if a tax bill didn’t work out, it would be all Mnuchin’s and Cohn’s fault.

Commented Wyden afterward, sounding just a bit dazed by the experience and the week, “You can’t make this stuff up.”

After all, he noted, “We’re only talking about remaking the entire American economy.”

Whether Washington can make up, let alone enact, a major tax overhaul remains murky. Thursday, after many delays and postponements, House Ways and Means Committee chairman Kevin Brady, R-Texas, finally rolled out a bill – cobbled together over the last minutes and scheduled for committee action next week without the annoyances of public hearings.

Cutting taxes, of course, is not hard. By all accounts, including observation of the early Reagan and George W. Bush administrations, it can be rather delightful. What’s hard is paying for it, especially if the goal is to avoid a filibuster by qualifying under the Senate’s reconciliation rules.

Especially if, by Wyden’s (and other people’s) calculations, Republicans have promised, over the next decade, $4 trillion in tax cuts. Even charging $1.5 trillion to the national debt, it means they have to come up with a lot of new tax revenue to balance the cuts, and several of the strategies involved are aimed directly at Oregon.

The original plan was to save some money by repealing the Affordable Care Act, which would have sharply hit the finances of Oregon, perhaps more invested in Obamacare than any other state. (It also would have hit hard at Oregon hospitals and at several hundred thousand Oregonians who’d gained health coverage.)

Last week, Trump suggested finding some money by using the tax bill to take another hack at health care, but congressional Republicans had apparently had enough of wrestling with that issue.

Instead, Brady had another last-minute idea, cutting the 401(k) deduction – a curious strategy at a time when private company pensions are collapsing – but that vanished after Trump tweeted against it.

So to achieve the declared Republican goals – including cutting the corporate tax rate nearly in half and entirely eliminating the inheritance tax that starts at a couple’s estate of $11.9 million – the next idea was to end the deductibility of state and local taxes, thought to be a good joke on high-tax states, considered mostly Democratic. According to a study by the Government Finance Officers Association, Oregon has the sixth-highest dependence on the deduction, with 36 percent of Oregon filers claiming it.

But after the home-building industry exploded against the idea, Brady proposed tweaking the idea, allowing deductions of property taxes but not state income or sales taxes. (Texas has high property taxes but no state income tax.) This plan could still be a political problem for GOP congressmen from high-tax states, who might some day want to go home.

The plan released Thursday indeed ends the deductibility of state income and sales taxes, and limits mortgage interest deductibility to the first $500,000 of mortgages – a limit running directly against the trend in Portland metro real estate prices. A headline on Bloomberg News Thursday explained, “Oregon, New York Top List of States Hit by Ending Tax Deductions.”

Well, it’s always nice to be on top.

In a press conference Thursday afternoon, Wyden declared, “The final price tag for this Republican bill is still a question mark… But what’s not going to change is the fact that this plan is massively skewed toward those at the top.”

In mid-October, riding between La Grande and Pendleton, Wyden observed about Republican tax designers, “It’s not at all clear what they’re going to do. They make it up as they go along.”

Last week, as time ran out, the tax bill process still looked like a practice exercise at an improv theatre company.

You can’t make this stuff up.

And looking at it from Oregon, there seems no reason why you would want to.

NOTE: This column appeared in The Sunday Oregonian, 11/5/17.

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