Dec. 16



New Senate: DEM 49             GOP 52

New polls:  
Dem pickups: (None)
GOP pickups: (None)

Previous | Next

Editorial note: We have split Minnesota into two parts to reflect the two Senate elections that will take place in 2018. There is the regular one for Democrat Amy Klobuchar and the special one for soon-to-be-former senator Al Franken's seat, which will be filled by Lt. Gov. Tina Smith (DFL-MN). If you move the mouse cursor over the state from top to bottom you will see both races.

Blackmail Works

Sen. Marco Rubio (R-FL) threatened to vote "no" on the tax bill unless the amount of the refundable child tax credit was increased. Bingo! The amount of the refundable child tax credit was increased yesterday from $1,100 to $1,400. The fact that the credit is refundable is very important for people so poor that they don't have to pay any federal income tax. Under the new bill, a poor family with three children can file a tax return and receive a check from the government for $4,200. Rubio is likely to mention this (repeatedly) during the 2020 presidential debates, should he decide to run again. He may even mention it three times in one minute.

In an unrelated but welcome piece of news for the Republicans, Sen. Bob Corker (R-TN), a deficit hawk, said he is now for the tax bill, even though it increases the deficit just as much as the earlier bill he opposed. He explained his flip-flopping by saying he had talked to many people. Probably included among them were the Republican leaders of the Senate who told him that it is a great bill and besides, deficits don't matter (except when the president is a Democrat).

With Rubio and Corker on board now, the bill is all-but-certain to pass. Nevertheless, the Republicans are taking no chances. A group working for the House leadership, the American Action Network, has spent $24 million blanketing the country with ads in over 60 congressional districts and is now planning to make a million robocalls encouraging House Republicans to vote for the bill. (V)

MacDonough: Thou Shalt Not Do Politics in Church

Republicans are using the budget reconciliation procedure to ram the tax bill through the Senate with only 50 votes, but it turns out that procedure comes with some restrictions. In particular, a bill passed using it can only deal with items that affect the federal budget. One item that was in it was a repeal of the Johnson Amendment, a provision of the Internal Revenue Code introduced by then-senator Lyndon B. Johnson in 1954 that prohibits churches (and other nonprofits) from supporting or opposing candidates for public office. Evangelical churches have long hated it, since it prohibits them from helping the Republican Party and its candidates. They were overjoyed when Donald Trump supported its repeal and then the repeal was included in the tax bill.

Unfortunately for them, Senate parliamentarian Elizabeth MacDonough has ruled that allowing churches to get into politics does not affect the federal budget so it is not allowed in a tax bill. Consequently, it will have to be stricken from the final bill.

Not all churches are unhappy with the Johnson amendment staying in place. Some of them were worried that churches would be overwhelmed with donations earmarked for political campaigns, thus turning them into a kind of PAC to the detriment of their religious mission. Also, members of a church who didn't agree with how the church was making political donations might leave the church, costing them members. Of course, Congress could pass a stand-alone law removing the Johnson Amendment from the Code, but Democrats would be certain to filibuster that, so such a law has no chance. All in all, MacDonough's ruling is a small victory for the Democrats on a bill that none of them are expected to vote for. (V)

What's in the Tax Bill?

The sausage has now been made, with some ingredients being added, and others taken away. CNN has a good breakdown of the key provisions of the final bill; here's the executive summary:

• Lower individual rates: Currently, there are seven brackets for individual income taxes: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. The number of brackets will remain the same, per the Senate's preference, but the rates will be 10%, 12%, 22%, 24%, 32%, 35% and 37%. That's a small drop for everyone except the folks in bracket six, which covers the enormous number of Americans making between $416,700 and $418,400 a year (if they are single; the range is a little broader—$416,700 to $470,700—for couples). Bracket one doesn't change either, but those individuals—who earn less than $9,325 a year—will now be able to deduct their entire income.
  
  
• Bigger standard deduction: For unmarried people who do not itemize their taxes, the standard deduction will rise to $12,000 from $6,350. For married couples filing jointly it increases to $24,000 from $12,700.
  
  
• End of personal exemptions: Though the standard deduction will get bigger, the $4,050 personal exemption that people may claim for themselves and their dependents will disappear. The upshot here is that families with three or more children will generally end up worse off under the new bill.
  
  
• State and local tax deduction capped at $10,000: The century-old SALT deduction was too popular to kill entirely, so it was just killed partly. This will hurt wealthier people in blue states, mostly.
  
  
• Expanded child tax credit: The per-child credit will be doubled to $2,000, the amount of that $2,000 that is refundable to those who pay no taxes would increase to $1,400, and the income threshold for qualifying for the credit would be raised. Right now, single parents can earn only $75,000 if they want the credit, while married couples can earn $110,000. Those numbers would jump to $200,000 and $400,000. When all the numbers are crunched, this ends up being a $2,000 per child gift to wealthier families, and something like a $75 per child gift for poor families.
  
  
• Credit for non-child dependents: If junior doesn't leave the nest, or mom and dad have to move in because of their age and infirmity, filers can now claim a $500 credit per non-child dependent.
  
  
• Lower cap for mortgage deductions: Currently, the interest paid on the first $1 million of a mortgage is deductible, as is the interest paid on the first $100,000 of an equity loan. Those numbers will drop to $750,000 and $0, respectively.
  
  
• Fewer people pay the Alternative Minimum Tax: The AMT is for people who earn an income not subjected to other taxes (most commonly stock dividends). Originally, the plan was to scrap it entirely. Instead, the exemption levels will be raised. Previously, single people earning $54,300 or less and married couples earning $84,500 or less were exempt. Now, those cutoffs will be $70,300 and $109,400. Sorry, Mr. President.
  
  
• Several popular tax breaks are kept: Grad student tuition, student loan interest, and teachers who pay for classroom supplies are not going to be taxed, after all.
  
  
• Estate tax is effectively killed: At the moment, the first $5.5 million of an individual's estate and the first $11 million of a couple's estate are not taxed when they die. The new bill will double those numbers. However, most rich people are wealthy and/or clever enough to find instruments that allow them to dodge the estate tax anyhow (most commonly trusts). At the moment, only 0.2% of estates end up paying inheritance taxes; that number will now drop well below 0.1%.
  
  
• More conservative estimates of inflation: The new tax bill will calculate inflation based on "chained Consumer Price Index," which invariably results in a smaller number than the currently-used (unchained) Consumer Price Index. The net effect, over time, will be smaller deductions and exceptions relative to buying power.
  
  
• Obamacare mandate is killed: This is one of the biggies; while the Republicans were unable to repeal Obamacare, they are able to cancel the penalty for not buying insurance. The GOP needed that "win," and they really needed the extra money that will result from the policy change. Fewer people will now buy insurance, and so the government will have to hand out fewer subsidies. Yes, there will be more sick and/or dead people, but if wealthy people and corporations are going to get more money back, well, sacrifices must be made. Ideally, sacrifices that do not affect wealthy people and corporations. It should be noted that this provision does not take effect until 2019, which could well give time for Congress to change its mind. Or for the American public to change its Congress.
  
  
• Lower taxes for pass-throughs: S-corporations, LLCs and partnerships will pay lower taxes, but people in service professions (lawyers, doctors) will not be able to use this workaround to reduce their tax burden unless their income is less than $157,500. So, general practitioners maybe, but neurosurgeons not so much. Still, experts warn that there are still many ways available to game the system, particularly for owners not actively involved in the running of their businesses.
  
  
• Lower corporate taxes: The corporate rate would be slashed from 35% to 21%, and the corporate AMT will be eliminated. The Kochs are going to party like it's 1999.
  
  
• Changes in multinational taxes: Corporations would be able to bring foreign profits they've got stashed abroad back to the U.S. by paying a low 15.5% tax rate on them (8% on equipment they have purchased). Going forward, they would not have to pay taxes on foreign profits, since they will have (generally) paid taxes in the country where the profits were made. There are rules in place to stop corporations from gaming the system, but corporations tend to have a special talent for finding loopholes. And one imagines that a bill slapped together in a week will have a loophole or two.

Given that the bill seems certain to pass, it means that America (and the world) will now sit back and wait to see what happens on at least three fronts. First, what will the impact on the economy/stock market be? Second, how will the voters react? And third, what flaws in the bill will present themselves, once the pros have time to explore and exploit weak spots? Fareed Zakaria argues that this is, "the worst piece of legislation in modern history." By the time next year's midterms roll around, we'll have had one income tax season and nearly four quarters of stock market performance, so we should have a pretty good sense of whether or not he's right. (Z)

Democrats Will Use Net Neutrality to Energize Millennials

The FCC's decision to repeal net neutrality may turn out to have been shortsighted. The phone and cable companies love it, but millennials hate it. Studies show that young people use the Internet far more than old people, and they care passionately about keeping it open and not giving the phone and cable companies control over which websites they visit. Democrats have noted this and plan to make a pitch to millennial voters that Republicans want to destroy a free and open Internet so the carriers can make more money. It could be a powerful argument to energize younger voters next year, who often need motivation to get out and vote. Democrats want Congress to pass a law prohibiting carriers from favoring some websites over others, but Republicans are against this. This issue could play a role in some House races, particularly those in purple districts that are home to a major university or two (think: Raleigh, NC). (V)

Trump's Popularity Is Plummeting

A new AP/NORC poll released yesterday puts Donald Trump's approval at 32%, making him the least popular first-year president in history (at least, since approval ratings began to be recorded in the 1940s). Despite the booming economy, only 40% of Americans think he is doing a good job on the economy. On the other hand, only 30% approve of how he is doing on health care, foreign policy, and taxes. The poll also found that only 9% think the country is more united under Trump while 67% think it is more divided. (V)

Woman Drops Out of House Race on Account of Sexual Harassment Charge

It is not exactly "man bites dog" or even "woman bites dog" in this case, but not all cases of sexual harassment are a man harassing a woman. Sometimes it is the other way around, though the problem is the same, as Kansas Democrat Andrea Ramsey discovered. Ramsey was running for the House against Rep. Kevin Yoder (R-KS) in KS-03 when a 12-year-old charge that she had sexually harassed a subordinate at the company for which she was then working came to light. The case was settled by her employer in mediation in 2006.

Despite the long timeframe and despite the fact that Ramsey had no involvement in the settlement, when the story broke, the DCCC and Emily's List both dropped her like a hot potato (or a hot potatoe, if you are Dan Quayle). The 56-year-old Ramsey has vigorously denied the charges and said the case has been brought up by Republicans for political purposes. Without the support of the DCCC and Emily's List, Ramsey concluded she had no chance, so she dropped out the race.

The Democrats will do doubt immediately begin looking for a new candidate so they can contest the district. Although KS-03, which includes Kansas City, has a PVI of R+4, Hillary Clinton won it in 2016 and the Democrats think they can knock off Yoder with the right candidate. (V)

Another Dubious Judicial Nominee

Actually, "dubious" is probably putting it nicely. As part of the GOP's efforts to get as many conservative judges on the courts as quickly as is possible, the Senate Judiciary Committee is interviewing Donald Trump's nominees in groups, five at a time, with each member of the committee given five whole minutes to examine the entire group.

Among the members of the Committee is Sen. John Kennedy (R-LA), who may well be the Senate's foremost expert on the law. He has law degrees from both the University of Virginia and Oxford, spent years in both private and government practice, and has been a law professor as well. As he tried to make the best use of his five minutes on Wednesday, Kennedy's focus fell upon fellow UVa lawyer Matthew Spencer Petersen. Petersen currently serves on the Federal Election Commission, and is up for a seat on the US District Court for the District of Columbia.

During the Senator's interrogation, Petersen was first forced to concede that he's never tried a case in court, he's only taken a few depositions (assisting a more senior lawyer, in all cases), and that the last time he read the Federal Rules of Civil Procedure was back in law school (and, if you watch his face when he answers that question, you are left with the impression that he may not have actually read them then). Having established that Petersen has virtually no relevant experience, Kennedy then moved on to testing his knowledge of the law, tossing him what should have been Trial Law 101 softballs. However, Petersen did not know what a motion in limine is, or what the Daubert standard is. Since those both have to do with what evidence is admissible in a trial, they might just come up if Petersen is seated. The good news for the would-be judge is that he was able to answer one question correctly. When Kennedy asked if he has ever blogged his support for the KKK, Petersen declared proudly that he had not. Not every Trump nominee can say that without perjuring themselves.

Interestingly, the ABA had deemed Petersen to be "qualified," which really tells you something about the four nominees they have given the thumbs down. The odds are pretty good that, even with the embarrassingly bad performance, Petersen would have been approved, had Sen. Sheldon Whitehouse (D-RI) not posted the video of Kennedy's interrogation to social media. Now, the odds are he will have to withdraw. Still, Trump may be losing a few battles on this front, but he's winning the war. In addition to the SCOTUS associate justice, 12 appeals judges, and 6 district judges he's already gotten approved, he's got another 38 in the pipeline. Even if a half-dozen of those somehow fail—and that would be an extremely high number—then Trump will end up seating 51 judges in roughly his first year in office. That's well ahead of Barack Obama, who seated 27 in his first year. (Z)

Trump Lawyers to Meet with Mueller

Early next week, Donald Trump's legal "dream team" of Ty Cobb, John Dowd and Jay Sekulow are going to have a sit-down with special counsel Robert Mueller. Their goal is to get some sense of how much longer this is going to take, and exactly when Trump will no longer be under the microscope. Odds are that, in addition to asking questions, they will also strongly "encourage" Mueller to wrap it up.

The problem that Cobb et al. face—and both they and Mueller know it—is that the special counsel holds all the cards. He does not have to tell them anything, and he does not have to bow to their pressure at all. The odds are that Mueller will come into the meeting with his own agenda, and it will be Trump's lawyers who feel the pressure. And given that everyone is playing things close to the vest, our best sense of how things went may come from watching certain Twitter accounts the morning after the meeting. (Z)

Back to the main page