Spotlight: Pressure on GOP increases as U.S. Senate gets to work on Trump's tax reform

Source: Xinhua| 2017-10-17 10:04:52|Editor: liuxin
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by Matthew Rusling

WASHINGTON, Oct. 16 (Xinhua) -- The U.S. Senate is gearing up this week to start ironing out a tax revamp unveiled by President Donald Trump, just after the GOP lost a major legislative battle. Republicans will have to pass this one, or risk losing credibility with supporters.

The Senate will consider a budget resolution, which is the first step in passing tax reform. But the GOP may have thin support, as one Republican lawmaker will be out of town and unable to vote.

The move comes just a few months after Trump failed to pass a repeal of the Affordable Care Act, the previous administration's healthcare overhaul, also known as Obamacare.

While Trump's supporters do not blame him, they have for years been unsatisfied with Congress on both sides of the isle. If this legislative battle is lost again, GOP lawmakers could lose votes in next year's congressional elections.

Trump was elected by voters who are highly frustrated and fed up with the general direction of the country, with jobs and the economy topping their list of grievances.

While official government figures say unemployment is low, critics say the numbers skew the true number of jobless people in the United States, as they do not include those who have given up seeking full time employment due to a lack of prospects.

While jobs are plentiful and high-paying in such major cities as Washington, New York and elsewhere, rural areas are suffering economically.

With so many struggling middle class families, tax reform is a number one priority for the White House, and a major concern of many Americans. Many Americans believe they are taxed too highly, which reduces their ability to buy homes, pay for their children's education, or save for retirement.


The White House claims it will cut taxes for middle class families, as well as cut the U.S. corporate tax rate - one of the world's highest.

Many U.S. corporations complain that they not only have to pay U.S. taxes, but also have to pay local taxes in the countries outside the United States where they do business.

Corporations say fewer taxes will allow them to create jobs, although critics of Trump's plan say it is simply a tax break for the wealthy.

"The corporate tax rate cut is likely to draw investment to the United States, although the increased deficit may push up interest rates and crowd out some investment," Alan Viard, a resident scholar at the American Enterprise Institute, told Xinhua.

"On balance, there could be a small boost to the economy, but not the large boost that some supporters are claiming," Viard added.

The Urban-Brookings Tax Policy Center's Sept. 29 preliminary estimate shows that middle-class households will receive a tax cut in the aggregate, although it would be smaller, as a share of income, than the aggregate tax cut for high-income households.

However, a minority of middle-class households, particularly upper-middle-class households with several children living in high-tax states, would experience tax increases, Viard said.

If the corporate tax rate cut draws investment to the United States, middle-class workers would earn higher wages, because a larger capital stock would increase their productivity.

However, the increased debt issued to finance the plan would have to be serviced through future tax increases or spending cuts, part of which would likely fall on middle-class households, Viard said.

The net impact on middle-class households is hard to determine and will vary from one household to another, Viard said. < One concern is the vast income disparity between many U.S. states, cities and towns.

For example, a couple making a combined 200,000 U.S. dollars per year in a rural area would be considered wealthy. But that income would be considered moderate to slightly below moderate in many major U.S. cities.

That is because of a combination of sky-high real estate prices in major cities, high prices for quality food, and other factors such as massive student loans and rising child care costs. Still, taxes are calculated mainly based on income, not cost of living.

"The plan does not include a definition of 'rich,'" Viard said.

"Under the plan, as under current law and most other reform plans, tax brackets and the standard deduction are uniform nationwide, with no variations reflecting cost-of-living differences," Viard said.