Republicans' tax plans gain speed; Fitch warns on deficit

Republicans' tax plans gain speed; Fitch warns on deficit
From Reuters - November 7, 2017

WASHINGTON (Reuters) - Republicans in the U.S. House of Representatives forged ahead on Tuesday with legislation to reshape the U.S. tax code, while a top credit-ratings agency said the bill would balloon the budget deficit and give only a temporary boost to the economy.

As the House tax committee weighed amendments to a bill that Democrats have blasted as a give-away to the rich and corporations, the Washington tax reform debate was fast shifting to the Senate, where Republicans hold only a slim majority.

Senate Republican leader Mitch McConnell said he and his colleagues would unveil a tax bill on Friday, but his office later issued a statement saying that he misspoke and suggested a bill would be available at the end of the week.

The House is aiming to vote on its bill next week, a senior Republican said.

Tax reform has been a priority of President Donald Trump, who says it will stimulate economic growth. Republicans have yet to score a major legislative accomplishment since Trump took office in January, even though the party controls both chambers of Congress as well as the White House.

Fitch Ratings predicted that a Republican tax plan would win passage in both chambers, but did not see it offering long-term benefits.

Such reform would deliver a modest and temporary spur to growth. ... However, it will lead to wider fiscal deficits and add significantly to U.S. government debt, Fitch said, revising up its medium-term U.S. government debt forecast.

The U.S. national debt now exceeds $20 trillion. Republicans once firmly opposed adding to the debt, but since taking power in Washington their emphasis has changed. Congress Joint Committee on Taxation (JCT) said the House bill would add nearly $1.5 trillion to the national debt from 2018 through 2027.

Trump and congressional Republicans say the proposed tax cuts would boost economic growth so much that new government revenues would be generated and offset the tax cuts. Few economists agree.

The House bill slashes tax rates for large corporations, small businesses and wealthy Americans, while sharply reducing or eliminating tax breaks that benefit many middle-class Americans such as deductions for state and local taxes, college tuition and home mortgage interest.

The JCTestimated the House bill could result in higher taxes for as many as 38 million people who earn between $20,000 and $40,000 per year, beginning in 2023.

In the House, Republicans have an overwhelming majority and drafted their bill in secret, ignoring Democrats. The House bill was unlikely to be taken up in the Senate, where the Republicans two-seat majority means that they need to pay more heed to moderates within their own ranks and Democrats, lobbyists and analysts said.



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