Has not rewritten its tax code since 1986
This powers of the status quo in this town are so strong
yet
227 men and women of this congress broke through that today that
is powerful
Welcome to the journal editorial report i'm paul gigot a, major
Step forward thursday in the republican push to overhaul the tax code with a, house passing its tax cuts and jobs act by a
227 the 205 vote all eyes now on the senate, where the fate of the reform is less than certain
With republican ron johnson of wisconsin declaring his opposition, wednesday to the plan as it now
Stands joining the panel this week wall street journal columnist and deputy editor dan henninger
Columnist kim strasse and editorial page writer kate bachelder, odell who for her sins is covering the tax bill so
You, saw it pass the house i was the thing that surprised, me is how
Relatively little drama there was in the sense that they didn't have to break people's arms they got only 13 republican
Defections that's right and they had votes to spare you know, we're seeing an entirely different story than
We did on health care reform earlier, this, year why, why
Do you think that is well i mean one reason is because health care reform failed and so now republicans understand that their very
Political lives depends on passing tax reform so i think we're generally picking up the pace here and i think the senate now has
Really, wants to get this done before the alabama special election when they might lose another republican seat
And have a thinner, majority, but the defections of the 13 defectors i think 12 of them were from high tax states
California and new jersey and new york in particular
That's because of the state and local tax deduction right right so basically the house
Did a a carve out for property taxes up to a certain amount. And then eliminated the state and local deduction, which we know?
Subsidizes blue states that have, high tax rates and but but
So they're, saying that's going to hurt, my, constituents i'll have to tell you kate i mean i never thought
They'd pull this off because that's a huge
Tax deduction that they're eliminating right i mean its enormous reagan tried this in the 80s he couldn't pull it off
Right i mean it got taken out of the 1986 act
Which, was the last, major reform so it is quite surprising that it looks like
This, this deduction is heading for death row
It's in the senate bill as
well in fact they don't even have an accommodation for property taxes they just get rid of it i
Think, they will restore that when a court conference assuming
This, passes this it's the day of reckoning for those three states after all these years new
York, california new, jersey been raising taxes on their on the public
And they benefit the most from that deduction it is extraordinary that it was all those virtually only?
House members from those states, who voted against the tax bill
And that everyone else actually supported this thing and i think what if i were?
Congressman from one of those states i say look i voted against, this thing this provision
We tried to keep it in and i would turn to the people in my state and say
We have got to lower taxes in these states because this
Is what they have done to us the whole country has turned against those three states and kim i think this
Is what demick one price the democrats are paying for total opposition to this bill in contrast to the 86 act when
democrats decided to negotiate
And they were able to get some things they, wanted i as part of a bipartisan reform here they're
Sitting it all out and so republicans have little incentive to try to accommodate them in order to get some votes
Absolutely if chuck schumer, had stepped up to the negotiating plate you can
Absolutely bet that there probably would have been an accommodation for new
York, and new jersey in california instead you see all of them furious over this, issue suddenly democrats have decided that
You know not being able to deduct things from your property taxes is a terrible idea?
And and that they
want to lower taxes so jerry brown out in california is saying you can't do this you've got to take care of it
All right, what do you think ron, johnson wants kim and in the senate he's he announced this week i mean he's a pro-growth
Guy, we've know, we know i'm he i don't think he, wants to kill the bill but i do think he wants?
Some concessions what does he want?
Well ron johnson has been saying all along he's very concerned about smaller businesses that
File in their taxes as corporations or pastors and he says that when you look at the bills
They are not given as good a treatment as corporations so
Corporations for instance a brooke come down to a
20% rate but pass throughs they get a deduction there and then, by the time they pay
Some surcharges it's more like 35 so he
Wants better treatment for them and the question now is is how can you do that and some of the ideas out there from
Equalizing the treatment, would in fact be good
Mm-hmm, okay, yeah okay, you could, lower the top rate to 35% from 38.5. In the senate bill which would make the
Deduction more valuable against a lower rate that would be one way to solve it i think ron
Johnson's case here is a little thin, because corporations are double taxed on dividends as
Well and are much more disadvantaged under the current system what, we see is see corpse wanting to become these
Pass-through it's not the other way around but ultimately i don't think this
Is the kind of technical details you kill a bill over and i think they will come to an accommodation, yeah dan how
Do you, see this playing out in the senate you have john mccain you have other senators you know. You never know. How
They're, gonna, go that's true but you know this the mood here is so different than it was with the health care bill
Where you, had all the fractious nuts, which indeed started in the house
Here the passage, by the house the way they
Do republicans holding together i think has really created a mood and a
Momentum behind this bill add to that the fact that the republicans
Really, need to get something done in addition to alabama i would mention the virginia gubernatorial race
Huge setback i think that really focused the republicans so john mccain
Susan, collins i kind of i'm not.you know. You hate to say you think they're, gonna vote for cuz
they Got burned the last time but i think the momentum is behind this bill all right thank you all still ahead as the senate scrambles
For the votes needed to pass its tax reform what, would the oklahoma mean for economic growth and wages we'll?
Ask, former cbo, director doug hole taken next
With a, house, passing it's tax reform this week and the senate scrambling for the votes to pass its version
After thanksgiving we're, back with a look at what the overhaul?
Would mean for economic growth jobs and wages in the us economist douglas holtz-eakin is the president of the?
American action forum and former director of the congressional budget office so doug
Welcome back to the program let's look at this bill you look at the house and the senate versions kind of in toto wow
what do you think overall is going to be the economic impact if something close to to these bills pass i
Think, the important common elements are a corporate tax reform that gets the right down to 20% as we know we're?
Well out of line of the competitive rates in the developed world moves us away from a
Worldwide tax system toward one that only taxes firms on the, basis what, they earn in the us
Again, that's just getting in line with, worldwide norms makes us competitive they're, good investment incentives upfront expensing for the first five years
That's a message that says you should invest innovate and do it in the united states if that happens then
We get the capital accumulation, and the and the capital deepening that is typically associated with better productivity growth
That's been the missing element in the us equation with productivity growth come, higher real wages
and that's the missing part of the labor markets getting a higher standard of living so i
Both bills have that in common that's an important element
The over on the the pass-through side, which where more than half a, business income is taxed they're
Going to have to settle some differences in the bills the same basic
Message get rates down get capital accumulation incentives in place is something that they can accomplish those are the most important
Pro-growth elements of these bills and you think that would have a sand i'm asking a
Significant pro-growth impact on the american economy starting immediately
I think that's absolutely right, we you have a built in test as, well
Both bills have a deemed repatriation
We know there are trillions of dollars of us earnings parked offshore
In these bills on a date certain, they will be deemed to have been repatriated and no a?
Tax liability on them then comes the test, do they really, bring the money back if there's a good reform us corporations gonna
Say let's put that money in the us and we're gonna see big impacts right away if they don't do a
Good job on the on the growth incentives we'll know real quickly any concern on your part
By, the!
delay
And the senate bill of one-year in getting to the twenty percent rate now the
Expensing starts immediately in the senate and the house bills but the delay in this in the house set up to some
Economists say you know, what corporations are going to are going to delay for a
year taking profits, and that's gonna, delay the investment you agree i
Don't i think, they'll run the numbers and understand that it's way better to deduct costs against the thirty
Five percent rate and and have earnings taxed at the twenty percent rates so that one-year delay i think is a modest investment
Incentive to front-load things i don't think it's gonna impact the the long-run
implications of the bill, and i'm not entirely comfortable with it okay now i
Look, at the individual side of this reform frankly and i think it's not nearly as good in my view as the corporate side it's
Kind of a. Hash right i mean there's a classic. That's right i mean so
No, cut in the top rate except minor one in the senate and we know and i know your economic research you talk about rate?
Cuts especially at the higher levels and really give you the economic bang for the buck there's very little of that here
Indeed the house bill, goes the wrong
Way in many
Ways there's a there's a phase-out of the 12% bracket that gives an effective 45 percent marginal rate
That's going the wrong direction the senate goes the right direction but, not very far
The estate tax is a mishmash in both bills so i think the individual side turns out to be pretty much a
Wash at best as i mentioned the core elements are the business tax reforms
That those get the us back into the 21st century
They could do a lot better on the individual side okay now on the corporate side there's a
In the growth impact there's you get a wide range of views of just how much it would help the economy i think the tax
Foundation says it would increase it by growth by 0.3%
A year, in gdp larry, lindsey, who you and i both know says it could be 0.9
Percent so would take us a year on average that, would take us above 3% for the next four years of economic growth
Where do you fall in kind of the estimates and why that, why the variation
I'm pretty close to the long run impact of the tax foundation
And but the real issue is is that the speed at
Which the adjustment takes place if it gets heavily front-loaded if you get something that looks like a, boom that takes you above-trend growth
And a quick adjustment of trend growth you get closer to larry, lizzie's number i don't think you can
Get that high if the adjustment takes a long time you can get something, that's like, point two point three, okay?
So and if that happens, is that going to flow. Through to wages
Because as you as you know as our content?
We have a very tight labor market right now in much of the country i have to assume that if you get a big capital
Investment you're, gonna some of that's gonna go to productivity and a lot of that's gonna flow through to wages
That's in the data historically if you get productivity growth it flows through to real wages
And as i've mentioned before that hasn't been happening the us because, we haven't had the productivity growth so right now
We can have a tight labor market it could produce higher nominal wages it'll just get passed on prices you need the
Productivity piece to make people better off all right what, about the deficit concerns this is gonna according to the budget structuring
gonna
Add as much as a trillion
dollars to the deficit over ten years but i assume
Some of that a good portion of it will be made up with and faster growth
Because the growth estimates out of congress are now so so low at one point nine percent on average
Right i don't think anyone should be happy at the prospect of another
Trillion trillion 1/2 of deficits, we are in a fiscal mess i won't belabor that
So the question is what do you get for it and and if you get good growth if you?
Focus on the pro-growth elements then it's, gonna, be worthwhile if you just put out say the individual side which is a mash
It wouldn't. Be worth it so i think this is a proof is in the pudding moment
Okay all right thanks doug appreciate your being here
Thank you when we come back sexual misconduct
Scandals royal the senate as democrat al franken, faces groping allegations and republican candidate roy
Moore refuses to exit the alabama senate race despite pressure from
Republican leaders and a growing list
Of accusers diet beautified the democrats
In fighting it gets me because they don't walk
Many of you have recognized that
This is an effort. By mitch mcconnell and his cronies to steal this election
From the people of alabama and they will not stand for it they got a call and said asked
me to step down from the campaign
Well i want to tell you who needs to step down
That's mitch mcconnell!
defiant roy
Moore thursday refusing to bow out of the alabama senate race even as accusations of sexual misconduct
continue to mount a fox news poll released thursday shows, more losing support, amid the allegations he now trails democrat doug, jones
52 42 percent with nine percent undecided we're back with dan henagar kim strasse
And wall street journal columnist and manhattan institute senior fellow
Jason, and riley so kim we heard roy, moore he seems to suggest, that somehow
Mitch mcconnell gathered all these women to come in and make their arguments against him
Where does this stand at alabama now and i guess, what, do you think of these accusations?
Yeah, well we're now up to i think at least nine women, who have come out and alleged that of some form of sexual misconduct
against them you've, also
Had some important local reporting that quoted residents of work down in that area saying that it was well-known
Way, back when that roy, moore had a predilection for young women now
None of this has been proven but it's out there and there's no escaping it at
This point and you would think that if bro moore believed in the cause of a republican senate and he understood this he would
Step aside perhaps let, somebody, else run
He's defiant that he's not doing that he's defiant that these accusations are false
And what he's doing is now turning this into a battle between roy
Moore the the upstart republican and the establishment in washington dc
Much that kind of trump move as it were it looks like it's
Gonna cost him the seat jason it did very, well could this is a deep red, state this race should, not be anywhere
Near, as close as it is i don't think alabama has had a republican senator since the early 1990s maybe
1992 so this is this is shocking and and if people are wondering, why, people are sticking by
Roy, moore if to the extent that they are i think it has a lot to do with, how
these people feel they're perceived
By, mainstream media, by, these coastal elites these are the people
Who cling to their guns and their religion as obama said our people the deplorable z-- hillary described them as and roy
Moore, pushes back, against, them it's just like the plex off but the polls showed an that he's losing
Yeah, fox released a poll thursday night and he's down to doug, jones the democrat 52 42%
among
Women he's down 58% and so it you have a lot of write-in since october 18th roy doug
Jones is a pro-abortion
Absolutist i think it's a little hard to handicap what's going on down there and look if roy
Moore pulls out the republicans are gonna lose this race this is a problem there's two races going on here doug
Moore and doug jones and roy moore and steve bannon versus mitch mcconnell and i want to, ask, you about steve bannon
Because he he's the former white house aide who is wants to get rid of mitch mcconnell
And he's running he says he's gonna run all these challengers to republican incumbents roy
Moore, was his poster child
His first person he got behind here in this in the cycle and yet it turns out, that he looks
like he could be a loser i
What does this, do to the whole ban and insurgency?
Well i think if that's, why, you see roy
Moore probably based on advice from been a night wing of the party trying to make this into a
Abandon, versus mcconnell race and and deflect from these allegations that are going on because they've got a big stake in this now
The bannon crowd if he goes down
As you said first big trial balloon on this and and honestly though paul this has never been an enormous
Wing of the party anyway so it's it i think it would really puncture that balloon if he were to lose
Yeah, bannon is for losers i think would be the?
be the
Signature line so but let's talk, about, al franken, because that certainly has complicated the you know the bonfire of the sexual harassment
Allegations that we've seen, across the country, now there's one against
Franken including a photo of him attempting to grope a
Woman, while she was asleep, where he says it was a joke and there was no groping involved but it looks pretty ugly
What do you make of now there's gonna be an ethics investigation?
Franken, says he's gonna cooperate welcomes it but does this jeopardize a senate seat
i'm not sure i
I think, al franken might try
And fight this fight this fight it fight through it and and and and it's it's i think it's a little too early
to
Tell but it does demonstrate that this sort of despicable behavior is not limited to one party or one?
Ideology this is a much more widespread problem and and we've been focusing on the entertainment industry a lot of?
Late but i think this is just getting started in the political world i i don't think we're anywhere, near?
The end of seeing a sort of behavior and miracle of miracles day an
Democrats saying you know what way, back when bill clinton should have resigned
Kirsten gillibrand the senator from new. York saying that clinton should have resigned a very convenient 25 years later yeah
Well i think the broader point here paul, is that virtually all of this behavior that we've been reading
About is non-consensual and the bottom line, is some men are pigs with women and the world, would be better off without those pigs
Abusing, women kim what do you think where does this go with franken i mean this is a delicate one for the democrats?
Yeah, you can, tell that franken himself, was certainly, worried that this is where it might go he initially put out a
Short like non-apology then put out a very contrite statement in which he fully apologized
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