Judging from the initial details, Republican tax-plan writers have thrown out the idea that they should simplify the code. They’ve also decided that high-six-figure earners and wealthy heirs deserve a tax break.

The Tax Cuts and Jobs Act would lower the corporate tax rate from 35 percent to 20 percent and collapse the seven tax brackets paid by families and individuals down to four. It could create giant new benefits for the wealthy, cutting business taxes, eliminating the estate tax, and ending the alternative minimum tax. . .
It would cut in half the popular mortgage interest deduction used by millions of American homeowners, capping this tax deduction at new mortgages of $500,000 or less. Presently, Americans can deduct interest on mortgages of up to $1 million from their income.
This change could have a particularly big impact on high cost areas, such as San Francisco, New York, Boston, and the Washington D.C. area, and housing groups and lawmakers will likely try to defeat it. The bill would allow people to deduct their local property taxes from their taxable income, though this benefit would be capped at $10,000.

State and local income taxes would not be deductible, another hit to those in states such as New York, Massachusetts and California.

The estate tax will eventually disappear. And there is a further boon to the rich. Once the estate tax is eliminated, heirs still get the benefit of the “stepped-up basis” for capital gains, meaning they pay tax only on the difference between assets at the time of inheritance and the time when they sell. That’s an even bigger gift to rich heirs than previous proposals have suggested.

As for middle-class families, the devil will be in the details: “The bill’s true impact on the middle class will be difficult to immediately measure. The bill would create a new ‘Family Credit’ and expand the child tax credit used by working families. The child tax credit would grow from $1,000 per child to $1,600 for each child.” However: “The bill would nearly double the standard deduction that many Americans claim on their taxes, raising it from $12,700 to $24,000 per family. But this benefit would be partially offset by the personal exemption many Americans can claim, which can be large for families with multiple children.”

What remains striking is how little benefit the plan would apparently provide to the middle class as opposed to wealthy taxpayers. In the example of a $60,000 income family, the benefit is less than 2 percent of annual income. Contrast that with a family making $600,000, who will see a drop in the tax rate from 39.6 percent to 35 percent.

Also noteworthy is how complicated the the proposal is, in defiance of the promise to simplify the code. On the personal income side, we get a blizzard of rules concerning the 25 percent pass-through rate. The Wall Street Journal reports:

Passive owners of pass-through businesses would get the 25% rate, but those actively involved in the business would have a different standard. The bill starts with the presumption that 70% of that pass-through income is attributable to labor and would be taxable at higher individual income-tax rates. For some that would create a blended top tax rate of about 35%, which those businesses and their influential trade groups may argue isn’t low enough.
For professional services firms, including lawyers and financial-services professionals, the default rate would be 100% labor income, meaning they would get none of the benefit of the 25% tax rate for pass-through businesses.

Got that? A Washington-area CPA says wryly, “Well, there are opportunities here for [tax] professionals.” In other words, wealthy people will have even more incentive to hire tax professionals to reduce their payments, the exact opposite of what Republicans said they were after.

“My initial take is that the plan has all the problems we thought it did,” says Jared Bernstein of the Center on Budget and Policy Priorities. “It delivers huge cuts to wealthy households and multinational corporations, adds serious complexity and a big, new loophole on pass-through income. It incentivizes offshoring of investment and jobs.” He concedes, “Yes, it sprinkles a few cuts on some lower-income households, though one of these—the $300 credit—phases out as more goodies for wealthy estates and corporations phase in.” He concludes that there is “no question, some middle-income households will face higher taxes under this plan, especially those in states with income and sales taxes and those who claim itemized deductions.”

On the corporate side, the bill creates a mishmash, suggesting its pro-growth promises were oversold. While the corporate tax rate drops from 35 percent to 20 percent, “incentives for business investment lapse after five years.” The bill tries to split the difference between taxing only U.S. income from corporations and the present system:

U.S. companies would, generally, no longer pay taxes on their active foreign income, a move corporations and Republicans say is important in a competitive international landscape. To prevent companies from shifting profits abroad, the bill creates a new 10% tax on U.S. companies’ high-profit foreign subsidiaries, calculated on a global basis.
The plan also imposes new restrictions on foreign companies operating in the U.S. They would face a tax of up to 20% on payments they make abroad from their U.S. operations. That is designed to prevent them from loading up their U.S. operations with deductions and pushing profits to low-tax jurisdictions. Companies could lower those taxes by agreeing to have more of their operations in the U.S. tax system.

As one might expect, Trump’s plan takes care of himself and his real estate pals: “Many companies would face a new limit on their interest deductions, which would be capped at 30% of earnings before interest, taxes, depreciation and amortization, which is a measure of cash flow. Real-estate firms and small businesses would be exempt from that limit.”

In short, this is still a bill that directs enormous benefits to the rich and to corporations and hammers middle-class people in high-cost and high-tax states. The complexity of the proposals undercuts its claim to be “tax simplification” while diminishing some pro-growth aspects. It is a bill in which everyone will find something to hate.