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Illustration: Lazaro Gamio / Axios

The Senate has begun the debate on its version of the Republican tax bill. The bill tracks traditional conservative belief that if business tax rates are lowered, it'll boost the economy and benefit everyone. That means most cuts do go to the wealthy, but supporters say the overall benefits will be shared widely.

Why this matters: So much of what this bill actually does comes down not to numbers and rates, but theories about how the economy will respond. Ultimately, the only way to know how effective it will be is to see what happens.

What the bill does:

  • Significantly reduces the corporate rate while also reforming other parts of the business tax code. This means different businesses will see different degrees of change in what they actually pay in taxes, but gives businesses the opportunity to be more competitive globally.
  • Boosts the economy, at least in the short run. How much is debatable.
  • Makes corporations more profitable. Some of these additional profits will go to shareholders, some to balance sheets, some to workers. How much goes to each is a source of endless debate among economists. (Bloomberg reported that many major companies are already saying they'll first increase dividends or buy back their own shares.)
  • Increases the federal deficit. By how much depends on how much the economy grows, but the Congressional Budget Office thinks it would grow by $1.4 trillion over 10 years.
  • Lowers rates on pass-through income for small business owners.
  • Incentivizes companies to bring investment and production back to the U.S. Whether it will work is a different question.
  • Moves the U.S. to a "territorial tax system" for business income like much of the rest of the world
  • Creates winners and losers among individual filers, but mostly winners until the rates expire in 2026. (Here's details on how the cuts change over time.)
  • Repeals the Affordable Care Act's individual mandate, which will both free people who don't want insurance from paying a fine and raise premiums on middle-class people on the individual market.
  • Moves the ACA more toward a government-funded marketplace for low-income people.

What it doesn't do:

  • Force companies bringing money back from abroad to reinvest this money at home, or use it to increase jobs and wages. This means companies could easily choose not to do this.
  • Provide tax cuts for everyone. While a majority of people in each income bracket will see a tax decrease in the short run, some will see tax increases. Most middle class families will see a tax increase after 2025, when the individual cuts expire.
  • Permanently reform the individual tax code.
  • Close the carried interest loophole for most private equity, venture capital or real estate investors.
  • Pay for itself in economic growth, according to most credible analyses. Some economists say it could come close, others say nowhere near.
  • Address a growing economic shift towards automation, particularly in manufacturing and retail.
  • Break the ACA. Most people will be protected from the premium increases by subsidies, although people who don't qualify for subsidies, want insurance but can no longer afford it may be out of luck.

Go deeper

12 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.

12 hours ago - World

France recalls ambassadors from U.S. and Australia over submarine deal

Secretary of State Antony Blinken (L), French Foreign Minister Jean-Yves Le Drian (C), and French ambassador to the U.S. Philippe Etienne. Photo: Nicholas Kamm/AFP via Getty Images

France has taken the extraordinary step of recalling its ambassadors to the U.S. and Australia after both countries blindsided their French allies with a new military pact and submarine contract, the French Foreign Ministry announced on Friday.

The backstory: While sealing an agreement with the U.S. and U.K. to acquire nuclear submarines, Australia ripped up an existing $90 billion submarine deal with France. That led senior French officials to accuse the U.S. of a "stab in the back."

Updated 13 hours ago - World

In reversal, Pentagon now says drone strike killed 10 Afghan civilians

Caskets for the dead are carried towards the gravesite as relatives and friends attend a mass funeral for members of a family that is said to have been killed in a U.S. drone airstrike, in Kabul on Aug. 30. Photo: Marcus Yam/Los Angeles Times via Getty Images

A U.S. drone strike launched on Aug. 29 killed 10 civilians in Afghanistan, including seven children, rather than the Islamic State extremists the Biden administration claimed it targeted, the Pentagon said Friday.

Why it matters: U.S. Central Command said at the time that officials "know" the drone strike "disrupted an imminent ISIS-K threat" to Kabul's airport, and that they were "confident we successfully hit the target."