As an example, Gleckman points to the plan’s treatment of what are called “pass-through” taxes paid by small businesses. The GOP plan lowers the rate for these taxes, but includes several rules to prevent rich individuals from classifying themselves as dummy companies in order to pay less in taxes thanks to the new rate. Gleckman worries that these anti-abuse measures will backfire: Rich people will just hire smart lawyers to handle all the new paperwork, while the maze of caveats will make life hell for small businesses. Indeed, the National Federation of Independent Business, the lobby for the nation's small businesses, said on Thursday that it was “unable to support” the bill as released, due to concerns about the pass-through provisions.
How did a plan to simplify the tax code become such a mess? Blame the first principles of the proposal.
Before the last major tax reform in 1986, Ronald Reagan’s Treasury Department set out to pass an economically rational, deficit-neutral, bipartisan bill. The modern Republican Party, however, is starting from a principle that isn’t bipartisan, deficit-neutral, or economically rational at all: that, with corporate profits and the stock market at all-time highs, America’s largest corporations deserve a $2 trillion tax cut.