House Lawmakers Scheduled To Vote Thursday On Tax Overhaul

Nov 16, 2017
Originally published on November 16, 2017 11:38 am
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STEVE INSKEEP, HOST:

So how would this country be different if a Republican tax plan became law? The House votes on a tax bill today. The Senate has its own version. And we'll talk through both policy and politics with NPR business correspondent John Ydstie and Washington desk editor Domenico Montanaro. They're both on the line.

Good morning, gentlemen.

JOHN YDSTIE, BYLINE: Good morning.

DOMENICO MONTANARO, BYLINE: Good morning.

INSKEEP: So corporate taxes go down under this House plan, which we've been discussing a lot on the air here. That's the centerpiece. That's the biggest thing that President Trump wants to do - get business taxes down. Do they really need to go down, John Ydstie?

YDSTIE: Well, I think most policymakers think the U.S. is overdue for a corporate tax overhaul. And right now our top corporate rate is 35 percent, among the highest in the industrialized world - though the average that the companies pay is much lower. They spend a lot of money on tax lawyers, getting their rate lower. And then they stash money overseas and don't have to pay high rates.

And even the Obama administration floated a tax bill that would have reduced the top rate to 28 percent. So I think there's a consensus. We need a business overhaul. Whether we need it right now is another question.

INSKEEP: So you just made a fact-based case for a corporate tax reduction of some amount. And yet, President Trump keeps making false statements to justify this tax cut, saying we're the highest-taxed country, which is false. His aides say he means highest business taxes. You just pointed out that's not quite true either. What makes it so hard to make a case for this while using facts?

YDSTIE: Well, you know, I don't think it is hard to make a case for it using facts. I think what you have a hard time doing is saying, we need to do this now. We need to do it so urgently that we're going to cut one party out of the discussion and move ahead very quickly. The last time we made big changes like this it took a couple of years.

INSKEEP: Oh, OK. So we're talking about the fact that Republicans are using rules that allow them to do this only with Republican votes if they can get enough Republican votes together. Domenico, what are the politics of doing this business tax cut right now?

MONTANARO: Well, you know, one big thing that a lot of Democrats are pointing to is the permanence of the tax cuts for corporations, which would go from 35 to 20 percent. But yet, the individual rate would actually be only temporary. Only after eight years would they remain.

So they're calling this a little bit of a Trojan horse because it's like being able to sort of raise taxes for people eventually and yet have - in order to pay for those corporate tax cuts, you know. But eventually, you would think - and sort of what happened with the George W. Bush tax cuts is that they wound up having to extend them anyway. So we wind up having a fight about this eight to 10 years from now anyway.

INSKEEP: OK. So a lot of complexities there. Some tax cuts are set to expire, which is because of budget rules that would make them seem too expensive to the budget deficit if you let them go on forever.

I want to ask about another part of this because even as they're cutting corporate taxes, eliminating the estate tax and some other taxes, they are eliminating some deductions, which is a way for the government to raise more money. And that gets into the question of which deductions you eliminate. Let's talk about the home mortgage deduction. We had some discussion about it on the program yesterday. It was confusing to say the least, and I'd like to clean it up. So what is the home mortgage interest deduction now, John Ydstie, and how would it change?

YDSTIE: Well, right now you can deduct interest on mortgages up to a million dollars. The House bill would cut that in half. So if you had a mortgage of $500,000, you could deduct all the interest you pay on that loan. The Senate makes no change here. It remains the same.

INSKEEP: So let me ask about that, John Ydstie. If you're from my home state of Indiana, a half-million-dollar mortgage is a really, really nice house. But aren't there a lot of, essentially middle-class people with more than a half-million-dollar mortgages in more expensive places - on the coasts, for example, in larger cities, and frankly, bluer areas - who have higher home prices and would face a penalty here of sorts?

YDSTIE: Well, they would. And I think that's a big reason that you have organizations like the National Association of Homebuilders and the National Realtors Association opposing this bill. They also - when you think about it, what the Republicans are trying to do is they're doubling the individual - the standard deduction so that people will get compensated. People actually - again, people in lower-cost areas would be compensated more than the folks at the - in the higher-cost areas.

But the problem is that the home builders and the realtors believe that that will reduce the incentive for people to buy homes because they don't want - they don't need to get a mortgage and deduct interest rates to lower their taxes because they've got this big standard deduction now that they can use.

INSKEEP: Oh, I see. And, of course, we could have a long debate about whether the mortgage interest deduction really does support real estate prices or not. But in any case, it's a popular provision. Aren't there actually several provisions here, John, that would likely leave a lot of relatively middle-income or moderately affluent people paying more taxes rather than fewer taxes?

YDSTIE: Well, it is possible. I think this is one of them, certainly. Again, you now have the ACA in the mix, so you could end up with rising premiums for health care if that is repealed as the Senate would do. There's also the deduction for state and local taxes that is being eliminated by the Senate.

INSKEEP: That's right. So some state and local tax deductions would go away. The ACA, the Affordable Care Act - the Senate wants to throw that in, repealing the individual mandate. Domenico, are Republicans entirely comfortable with the way this tax plan is going?

MONTANARO: Well, Republicans, at this point, believe that they do have the votes in the House and in the Senate. There are, of course, some problems potentially with some of the folks in the Senate who, now that they're trying to repeal the mandate for the Affordable Care Act in there, that you're looking at people like Lisa Murkowski, Susan Collins of Maine and John McCain of Arizona and whether or not they decide to go against this, given that they sank the health care bill the last time around.

INSKEEP: Well, we'll see what happens. Gentlemen, thank you very much. Really appreciate it.

YDSTIE: You're welcome.

MONTANARO: You're welcome.

INSKEEP: John Ydstie is NPR's business correspondent. And Domenico Montanaro is the editor of our Washington desk. Transcript provided by NPR, Copyright NPR.