Drilling in ANWR, Carried Interest, and 3 Other Surprises Tucked Into the GOP Tax Bill
Now that the GOP tax bill has passed through Congress and is waiting on President Trump’s desk to be signed, the Tax Cuts and Jobs Act of 2017 will soon be the law of the land. But what is in the law, exactly? Tax cuts, of course, and plenty of them, if you listen to members of the Republican Party. Tax increases for graduate students? No, tuition benefits are safe.
Still, from the Arctic National Wildlife Refuge in Alaska to the manufacturing companies located in Puerto Rico, these five provisions have stirred controversy among voters, activists, and Democratic legislators. And like them or not, they will soon be law.
Drilling in the Arctic National Wildlife Refuge
One provision in the GOP tax bill mandates that the federal government hold lease sales in Alaska’s Arctic National Wildlife Refuge (ANWR). This would open the area up to oil drilling and other energy development, lifting a 40-year-ban on development in the area. Activists are outraged at the provision’s inclusion in the tax reform bill, while energy industry advocates are thrilled. “ANWR by itself would be a big bill,” said Trump before the tax bill vote.
Obamacare’s Individual Mandate Repeal
If it wasn’t for the GOP tax bill’s passage, 2017 might have been most notable for the Republican Congress’s inability to repeal and replace the Affordable Care Act, also known as Obamacare. But a provision of the tax bill removed the fines for not having health insurance, effectively killing the healthcare bill’s individual mandate. Supporters of Obamacare see this as a key part of the healthcare law.
But don’t be fooled by the president’s rhetoric — Obamacare isn’t dead. “It’s not a total replacement, but it takes the heart out of Obamacare,” Senate Majority Leader Mitch McConnell (R-Ky.) told Bloomberg before Tuesday’s Senate vote. Also, you’ll still need health insurance in 2018, or you may face a penalty.
Trump’s Carried Interest Loophole
President Trump has gone on the record many times to say the GOP tax bill wouldn’t benefit him personally. (Though, without having released his taxes, that point is up for debate.) He has also said many times that he wanted to close the carried interest loophole, a provision that benefits hedge funds managers by taxing them with a top rate of 23.8 percent rather than 40.5 percent, because their earnings are handled like long-term capital gains rather than income. Trump claimed to be against this. He said it in the debates, he said it on the campaign trail, and he said it after taking office:
So, as the tax reform bill got closer to a vote, it was curious see the carried interest loophole still open. Even economic advisor Gary Cohn is singing Trump’s tune. “We probably tried 25 times (to close the carried interest loophole),” Cohn told Axios. “The President asked just this past Monday if we could still get rid of it.”
The tax bill does not close the loophole.
Puerto Rico Penalties
Puerto Rico may have survived two massive hurricanes, but there’s concern that a financial storm caused by the GOP tax bill will put the U.S. territory completely underwater. Ahead of the tax bill vote on Tuesday, Governor Ricardo Rossello pleaded with Republican Party members to address a provision in the legislation that would be harmful to Puerto Rico. At issue is a provision of the bill that charges a 12.5% tax on profits from intellectual property owned by American companies abroad. For tax purposes — even though Puerto Rico is actually a U.S. territory — the island is considered a foreign jurisdiction. The governor was seeking an exemption from the tax, especially in light of the rebuilding that must take place after 2017’s hurricanes.
He didn’t get it — and now Rossello is threatening to organize displaced Puerto Ricans across the U.S. to torpedo Republican candidates in 2018’s midterm elections.
“I personally do not think that this is going to hurt Puerto Rico,” an anonymous White House official told reporters, reports Reuters.
The Corker Kickback
The most well-known hidden provision of the GOP tax bill (probably due to its catchy nickname), the Corker Kickback consists of last-minute changes that personally benefitted Sen. Bob Corker (R-Tenn.), who had previously opposed the tax reform package on the grounds that it expanded the deficit. The “kickback” allows real estate owners to use “pass-through” deductions for the first time – counting business income under lower personal income tax rates. Corker, for his part, has denied having any hand in how the changes were written.
Trump himself also owns more than 500 pass-through business entities.
The senator, who seems to relish being a pebble in President Trump’s shoe, is retiring when his term expires in 2018, has previously been adamant in not voting for any tax plan that increased the deficit. In explaining his support for the bill, Corker said, “I realize this is a bet on our country’s enterprising spirit, and that is a bet I am willing to make.”
The Congressional Budget Office estimated that the bill will add $1.4 trillion to the federal deficit by 2027.