BREAKING: Senate Republicans Submitted Wrong Tax Bill, Have To Scrap The Whole Thing

Senate Republicans hastily passed the tax reform legislation with unreadable handwritten amendments early morning on Saturday. Democrats strongly criticized the Republicans for their lack of transparency and warned that the bill is “disastrous.”

It appeared that the Democrats are right all along—the GOP tax bill is a mess. An article published on Slate indicated that Senate Republicans made a mistake worth billions of dollars when they were making handwritten amendments on the pages of the legislation.

The more than $300 billion error involves the corporate alternative minimum tax (AMT). It is a supplemental income tax imposed by the federal government to prevent companies from zeroing out their tax payments. It prevents corporations from claiming too many tax deductions. In theory, the rate under AMT is supposed to lower.

Republicans initially planned to eliminate AMT in the tax legislation. However, they decided to put it back in the legislation to raise revenues. Take note that during the Senate floor deliberations some Republicans particularly Sen. Bob Corker raised concerns about the country’s rapidly growing deficit. The Senate GOP leaders made last minute amendments in the legislation to ensure the passage of the bill.

As mentioned above, the AMT rate for corporations should be lower, but that did not happen under the Senate tax bill. They forgot to change it and left the current AMT rate at 20%.  Because of their mistake, companies will not be able to use tax breaks that were preserved in the bill. Companies will not be able to deduct their expenses in research and development.

According to a group of lawyers from Davis Polk, Republicans weakened their tax legislation by keeping the AMT rate as it is. They pointed that it should have the most important change to the international tax code as it will make the U.S. more competitive in global system of taxation.

The Joint Committee on Taxation estimated that maintaining AMT’s current rate will raise $40 billion.

On the other hand, NYU Law professor and tax expert Lily Batchelder’s calculation is significantly higher. She estimated it will actually cost companies $329 billion.  According to her, the figure could help limit the ballooning deficit, but it is bad for corporations as they are pushing to reduce the AMT rate.  The Republicans mistake means the R&D credits and international exemptions in the tax bill are useless.

Batchelder suggested the possibility that Republicans made more mistakes in the bill that are still not discovered. She said,  “I think this evidences what can go wrong when you try to pass massive tax reform this quickly,” as quoted by Slate’s Jordan Weissman who spoke to her.

The mistake on the AMT alone is a big headache for Senate Republicans. It will definitely make their corporate donors angry. If Republicans wants to appease corporations and the middle class Americans, which Democrats believe will greatly suffer, they should scrap their entire tax bill. They must work on a bipartisan tax reform legislation that is beneficial for those who really needs tax breaks.

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