Over at National Review, Jibran Khan reports that several Republican senators are still skeptical about the tax bill:
Most of the skeptics are concerned about debt. Susan Collins (Maine) questions the inclusion of individual-mandate repeal and the removal of SALT deductions. And Ron Johnson (Wis.) opposes the different treatment of different kinds of business taxes.
….Senator Johnson has emphasized the Senate tax bill’s treatment of pass-through businesses as the reason for his opposition to the bill as currently written. Pass-throughs are over 90 percent of American businesses and “generate over half of U.S. business income,” per a 2015 NBER paper. While they would face a lower tax rate under the reforms than they do now, pass-throughs would still face higher taxation than corporations. Johnson, whose family runs such a business, thinks this is unfair.
I’m an idiot. I wasn’t paying attention to this and vaguely thought that Johnson was taking a principled stand against the reduction in rates on pass-through income. After all, the whole point of pass-through income is that it passes through the business untouched to the owners and becomes personal income that’s taxed at personal rates. It’s absurd that under the Republican tax bill, the CEO of a big corporation has to pay 39.6 percent on her income while the CEO of a pass-through business only has to pay 25 percent.
But no! Johnson is all in favor of this. He’s only griping about the bill because the pass-through tax rate isn’t being lowered even more. He wants it to be taxed at 20 percent, just like corporate income.
Think about this. Under the Republican bill, $100 of corporate income is taxed at 20 percent, which leaves $80. If that $80 is used to pay the CEO, she then has to pay 39.6 percent, which leaves $48. But pass-through business income is treated differently. That same $100 is handed directly to the CEO, who then has to pay a 25 percent tax rate. This leaves $75. This is the greatest, least defensible gift to the rich in the entire bill, but Johnson thinks it’s still not enough. After all, the guy owns a pass-through business himself and he’s tired of having to pay so much.
Holy greedballs, Batman. It just never ends, does it?