Senate Republicans appear to have made a $289 billion mistake in last minute additions to the tax bill they passed in the early morning hours of Saturday morning. Which, according to some experts, could result in a massive tax rise for corporations as opposed to the cuts that President Donald Trump and the Republicans were aiming for.
The issue is around the the corporate alternative minimum tax (AMT), which is meant to stop companies from zeroing their tax bills every year. The alternative rate is lower, at 20%, but doesn't allow companies to take out as many tax breaks as the regular rate, which was 35%. Every tax year, corporations must calculate both the AMT and regular rate and pay the higher of the two.
Initially, the GOP were going to scrap the AMT all together, but decided to throw it back in at the last minute to raise additional revenue for Republicans who were afraid that the tax bill would increase the deficit.
But when the GOP wrote AMT back into the bill, they left it at its current rate of 20%. Which is the same as the new, lower regular rate of corporate tax. If the bill were introduced in its current form, AMT and the regular tax rate would both be 20%, but with AMT excluding many tax breaks available under the regular rate, corporations would be forced to pay the higher AMT rate.
How much would this mistake cost corporations? According to Justin Wolfers, a professor at The Economics Department of the University of Michigan, income from corporate taxes would rise by about $300 billion.
Lily Batchelder, a professor of Law & Public Policy at the NYU School of Law, came up with a similar number.
“The fact is, almost everyone who’s a corporate taxpayer is going to be an AMT taxpayer” under the bill, Bret Wells, a tax law professor at the University of Houston, told Bloomberg. Bloomberg also suggested that the mistake could have been the cause of a 0.1% fall in the Standard and Poor’s 500 Index on Monday.
Jennifer McCloskey, director of government affairs at the Information Technology Industry Council, suggested that the tax hike was a "drafting error" and called for AMT to be repealed completely or cut to a level appropriate with the new 20% corporate tax rate.
The bill is already set to go to a conference committee because the Senate and House bill differ so greatly, so it's likely that the issue will be amended in this period.
But obviously, the mistake has earned some criticism from social media.