The president’s proposal of the largest tax reform in the last 30 years.
The US Senate approved the deepest fiscal reform in 30 years early this Saturday and paved the way for Donald Trump’s first major political victory. The proposal, which underwent last minute alterations written by hand in the margins, in a frantic two-day debate, went ahead with the support of 51 Republican votes and the rejection of 48 Democrats and a Republican. Now, this bill must be harmonized in a bilateral commission once it leaves the House of Representatives.
The tax cut amounts to about $ 1.5 trillion over two years, with companies as the main beneficiaries. It lowers the corporate tax from 35% to 20% – below the rates applied in France or Japan – and doubles the exempt minimum for families (from 12,000 to 24,000 dollars).
The legislative proposal also takes the opportunity to eliminate a key mandate of Barack Obama’s health reform: penalties for those Americans who do not purchase health insurance. At the last moment, the senators incorporated some modifications, such as the maintenance of the minimum alternative rate (an additional minimum tax that was created to prevent companies and high incomes from dodging the Treasury by means of deductions) just as it is for companies and with an adjustment for individuals.
Once harmonized, the proposal will return to the Chambers to be ratified, and Trump will then be able to sign into law, something he hopes to do before the end of the year.
Trump could not afford another failure after the Obamacare debacle. The Republicans were clear that they wanted to overthrow the health reform of the Democratic president, but failed to agree on an alternative model. This time, the political cost of not being able to get the deep fiscal modification forward was much greater, for several reasons. First, because it is added to the previous one; second, because it is already close to completing a first year of government marked by the lack of significant victories in the legislative chambers and third, because the markets already assumed these fiscal stimuli and a change of script would undermine business confidence.