Democratic tax writers took aim at the Tax Cuts and Jobs Act’s (TCJA) corporate rate cut in recent hearings on Capitol Hill, offering a possible preview of the tax changes that could be in store if they retake the White House and gain control of Congress following this year’s elections.
Ways and Means Committee Chair Richard Neal (D-Mass.) called the reduction from 35% to 21% a windfall for corporations, indicating it was far more generous than necessary and went well beyond the more modest cuts proposed in earlier tax reform discussions.
Democrats were buoyed in part by revised baseline projections of corporate income taxes issued by the Congressional Budget Office (CBO) earlier this month, which reduced expected corporate tax revenues between 2020-2029 by $127 billion, or 4%. The CBO attributed $110 billion of that to revised effects of the TCJA, with much of the blame going to the regulations implementing the law, particularly for the international provisions.
Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) argued that Treasury overstepped its authority with proposed regulations creating the Global Intangible Low Tax Income high-tax exclusion last June. Wyden and Sen. Sherrod Brown (D-Ohio) have introduced legislation effectively blocking the exclusion, characterizing it as a giveaway that allows corporations to choose the lowest rate available.
Republicans in Congress largely brushed off criticisms of the TCJA and indicated proposals to roll it back are non-starters, pointing to strong economic indicators such as growth, job creation and the stock market as proof that the tax cuts are working.
But Democrats have shown no signs of backing down. Nearly every candidate running for the presidential nomination has called for at least a modest increase in the corporate rate, and strong buy-in from the top tax writers in Congress suggests the issue could be a key tenet of the party’s platform going forward.
Washington National Tax Office
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