Trump's tax reform bill is full of mistakes which won't be easy to fix, experts warn

'The amount of errors and unintended consequences in the tax bill is far beyond normal', says one expert 

Alexandra Wilts
Washington DC
Monday 26 February 2018 22:01
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President Trump and administration officials continue to tout the benefits of the tax cuts
President Trump and administration officials continue to tout the benefits of the tax cuts

President Donald Trump’s tax law that was passed by Republicans with breakneck speed last year is ridden with typos and glitches.

Mr Trump and administration officials continue to tout the benefits of the $1.5 trillion tax cut that he signed into law in December. But what’s missing in Mr Trump’s rhetoric is any mention of the snafus that could end up costing the federal US government big money, experts warn.

Legislation often contains a few errors, but not of this magnitude, experts have been quick to point out.

The glitches are not just typos. A lot of the discrepancies revolve around actual tax policy questions where there is disagreement between Democrats and Republicans, meaning the errors will be much harder to fix, according to John Wonderlich. Mr Wonderlich is the executive director of the Sunlight Foundation, a nonprofit which advocates for open government.

“The amount of errors and unintended consequences in the tax bill is far beyond normal,” he told The Independent. He said that eleventh-hour changes to the legislation and the non-transparent process used to pass it contributed to this result.

David Miller, a tax partner at Proskauer Rose, noted to The Independent that the last time Congress passed a sweeping tax bill, in 1986, the legislation had taken three years to develop and had the support of both political parties.

“This time the process was done in a matter of months,” he said, noting that legislators did not seek outside comments from experts and that the bill was pushed through Congress without a single vote from Democrats.

“That’s the reason, I believe, you’re seeing many more errors in this tax legislation than normal,” he said.

One such glitch blocks restaurants, retailers and even real-estate companies such as Mr Trump’s from deducting the costs of renovations over the short term, as Congress intended, the New York Post reported.

Instead, what appears to be a typo could force those businesses to spread out the tax breaks over 39 years.

Another mistake creates more loopholes that benefit Wall Street hedge funds and private equity firms.

For example, the bill enables wealthy money managers to avoid a crackdown on lucrative tax breaks, allowing them to pay lower taxes on some of their income than ordinary wage earners.

One way the dozens of errors can be fixed is through the passage of new legislation, called a technical corrections bill, that would amend the law.

But to pass such a measure in the Senate, Republicans would need the help of Democrats, who are in no rush to come to the aid of their colleagues across the aisle.

“We’re not going to say to Republicans, ‘Oh tell us what you want to do,’” Democratic Senator Sherrod Brown told Politico.

“We want to make the bill better, not just correct whatever technical fix is needed,” said Mr Brown, who sits on the tax-writing Senate Finance committee.

Another way the glitches can be fixed is by the Treasury Department issuing regulations that correct the errors – but this possible solution has limitations.

“If the statute is clear on its face, then it’s difficult for a regulation to contradict the statute itself,” Mr Miller said.

Attempting to use regulations to fix the issue could also result in litigation over the interpretations of the tax act.

“If the bill just says something ambiguous, or counter to what the drafters intended, they really need new legislation,” Mr Wonderlich said.

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