An arcane rule within the GOP tax bill could ruin the 20 percent corporate rate

An arcane provision within the Senate tax bill could end up undermining the benefits of lower rates for businesses in addition to also households, according to tax experts.

The Senate’s bill maintains the alternative minimum tax, a measure of which has been widely criticized as complex in addition to also onerous by both sides of the aisle. This specific was kept within the bill during a dramatic series of last-minute negotiations to provide lawmakers with about $173 billion in revenue over a decade of which would likely help offset costly deals. This specific helped to persuade reluctant Republicans to support the bill. although This specific also opened the door to a host of unintended consequences in addition to also a backlash coming from the business community.

“Retaining the AMT in reform will be even more harmful than This specific will be in its present form,” Caroline Harris, chief tax counsel at the U.S. Chamber of Commerce, wrote in a blog post. “This specific eviscerates the impact of certain pro-growth policies.”

Currently, the corporate tax rate will be 35 percent, in addition to also companies are only subject to the AMT if their effective tax rate falls below 20 percent. Government data show This specific raised about $4 billion in 2013, with most of the tax falling on the finance, mining in addition to also manufacturing industries.

although under the Senate tax plan, the corporate rate would likely be cut to 20 percent — the same rate imposed by the alternative minimum tax. If companies repatriated foreign earnings or used well-known credits like the one for research in addition to also development, their effective rate would likely fall below 20 percent — in addition to also the AMT would likely kick in.

of which would likely essentially wipe out the value of those tax breaks in addition to also penalize companies for taking advantage of the brand new system of which lawmakers have labored to create.

“This specific effectively repeals some tax preferences with strong political support,” said Lily Batchelder, a professor at brand new York University.

Households could also see their benefits scaled back. The Senate bill increases the income threshold subject to the AMT coming from about $50,000 to $70,000 for single filers in addition to also $78,000 to $110,000 for joint filers. Joseph Rosenberg, a senior research associate at the Tax Policy Center, said of which means fewer people overall will have to pay the alternative tax.

although because of various other alterations within the tax bill, the alternative tax would likely today hit almost every married couple with income between $300,000 in addition to also $750,000, according to his analysis. He estimated couples would likely pay about $8,000 more than they would likely have under the Senate plan, chipping away at the benefits of the bill’s lower rates.

Top Republicans have acknowledged the issues in addition to also signaled of which they intend to address the topic in a conference committee over the next few weeks before final legislation will be released. The House type of the bill repeals the individual in addition to also corporate alternative minimum tax. Ways in addition to also Means Chairman Kevin Brady, R-Texas, told reporters of which Republicans “feel strongly” of which This specific should be permanently eliminated.

“of which cost in addition to also complexity actually undermines some of the pro-growth provisions of which we kept within the tax code,” he said.

On Wednesday, Senate Finance Committee Chairman Orrin Hatch, R-Utah, also indicated of which lawmakers are hoping to take This specific out of the final bill.

“Right today This specific doesn’t look like This specific [will be in there],” he said, according to Reuters. “although you never know.”

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