November 21, 2017

Lower Corporate Taxes, Higher Wages? Voters Are Skeptical

“There’s this widespread disbelief among Republicans, as there is among Democrats and independents, that tax cuts for employers will redound to their pockets books,” said Jon Cohen, vice president of survey research for SurveyMonkey.

Americans’ views of the tax plan in general are more divided. The Times survey, which was conducted in early November, found that 52 percent of respondents said they disapproved of the plan, compared with 44 percent who said they supported it. (The survey did not distinguish between the House and Senate versions of the plan.) That is generally in line with other polls, although some have put support for the plan significantly lower.

In general, opinions of the Republican plan split predictably along partisan lines. More than 80 percent of Republicans said they supported the plan, and more than 80 percent of Democrats said they opposed it. Most Republicans likewise said they believed that they would benefit personally from the plan, while few Democrats believed the same.

The strong overall support for the bill among Republicans masks significant disagreement beneath the surface, however. The survey showed that support for the plan was much stronger among Republicans who considered themselves “very conservative” than those who considered themselves conservative or moderate. And many moderate Republicans and independents said they were less interested in cutting taxes than in reducing the federal budget deficit, a potential trouble spot for a bill that most analyses suggest could add $1 trillion or more to the deficit.

Republicans still have time to win over skeptics. Only about a quarter of respondents to the Times survey said they were paying close attention to the tax plan. But in a potential sign of trouble for the bill, people who said they were watching the process closely were more likely to oppose it — and to oppose it strongly — than those paying less attention.

“A lot of voters still have only weak views, but the people who have formed strong opinions already are quite negative,” said Guy Molyneux, a partner at Hart Research, a Democratic polling firm.


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Mr. Molyneux said there were elements of the plan, such as doubling the standard deduction and increasing the child tax credit, that generally polled well with voters in various surveys. But other elements of the plan could face more opposition. Various analyses have found that both the House and Senate bills would raise taxes on millions of middle-class families, and the House plan, in particular, would eliminate many popular deductions and credits.

Cutting corporate taxes could be a particularly tough sell for many voters. Polls have repeatedly found that Americans think corporations, and especially big corporations, already pay too little in taxes. Douglas Holtz-Eakin, a prominent conservative economist who supports overhauling the corporate tax system, said it is easy to convince voters that they should support tax cuts for middle-class families. The case for cutting corporate tax rates is harder to explain.

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“If you have a complicated argument like that, you have to lay the groundwork months, years in advance,” Mr. Holtz-Eakin said. That work hasn’t been done in this case, he added.

The complexity of the argument for corporate taxes may help explain why backers of the Republican plan have leaned into a simple formulation of their argument case: Lower business taxes mean higher wages. But Vanessa Williamson, a researcher at the Brookings Institution who has studied public opinion on taxation, said voters were likely to be skeptical of that argument.

In general, Ms. Williamson said, voters tend to fall back on their partisan positions when forming opinions on complex subjects such as taxation. But they might depart from those partisan views when they directly contradict their own experience. Experience, Ms. Williamson said, might lead Americans to doubt that their employers will respond to lower taxes by raising pay.

“Once you get to people’s actual paychecks, you’re confronting them with a question where they actually have personal information,” Ms. Williamson said.

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Why Companies Like Toys ‘R’ Us Love to Go Bust in Richmond, Va.


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The federal courthouse in Richmond, Va., where Toys “R” Us filed for bankruptcy. The bankruptcy court there offers several features attractive to the executives, bankers and lawyers trying to get an edge in Chapter 11 cases.CreditJustin T. Gellerson for The New York Times

The Toys “R” Us world headquarters are on a sprawling wooded campus next to a reservoir in Wayne, N.J., on a street that bears the name of the company’s iconic mascot, Geoffrey the giraffe.

But in September, when Toys “R” Us filed for one of the largest bankruptcies of the year, it did not go to nearby Newark.

Instead, the toy company followed an increasing number of corporations — from Gymboree to a major coal company to a Pennsylvania fracking company — that are choosing to file for bankruptcy in Richmond, Va.

In recent years, Richmond has become the destination wedding spot for failed companies. The United States Bankruptcy Court there offers several features attractive to the executives, bankers and lawyers trying to get an edge in the proceedings.

First, Richmond’s bankruptcy court offers a so-called rocket docket that moves cases along swiftly. Chapter 11 bankruptcy filings can be laborious proceedings that drag on for years. Gymboree’s bankruptcy was completed in less than four months.

Second, the legal record in that court district includes precedents favorable to companies, like making it easier to walk away from union contracts.

But perhaps one of the biggest draws, according to bankruptcy lawyers and academics, is the hefty rates lawyers are able to charge there. The New York law firm representing Toys “R” Us, Kirkland Ellis, told the judge that its lawyers were charging as much as $1,745 an hour. That is 25 percent more than the average highest rate in 10 of the largest bankruptcies this year, according an analysis by The New York Times.

“The numbers are stratospheric,” said Kevin Barrett, a lawyer at the firm Bailey Glasser, who represented the State of West Virginia in two coal bankruptcy cases filed in Richmond.

Companies can file for bankruptcy in a court district where they have an affiliate — a loophole that allows them to shop for the court they think will provide the best outcome.

For an affiliate to be incorporated in Virginia, it can use a “registered agent” with a local address, according to the state. For its bankruptcy filing, state records show, Toys “R” Us used a Richmond affiliate whose registered agent has an office in downtown Richmond.

Representatives for Kirkland Ellis and Toys “R” Us declined to comment for this article. So did a spokesman for the federal bankruptcy court in Richmond.

It’s not just the lawyers who stand to gain from the Toys “R” Us bankruptcy. The bankers and other professionals who helped arrange $3.1 billion in new debt to keep the company operating in bankruptcy will collect $96 million in fees, according to a court document filed by Toys “R” Us.

Executives at bankrupt companies typically agree to the high fees, bankruptcy experts say, because they think the cost will have been worth it if the lawyers and bankers can save their business. Kirkland Ellis has a long track record of getting companies back on their feet in bankruptcy.

The two judges in Richmond are also known for their expertise. “The judges understand the complexities of large corporate bankruptcies and can handle cases expeditiously,” said Dion Hayes, a local bankruptcy lawyer.

Still, the huge fees can eat into the money that is left over for small creditors — typically vendors, suppliers and pensioners.

In the Toys “R” Us case, dozens of suppliers of scooters, rubber duckies and teething rings could lose millions in the bankruptcy.

Linda Parry Murphy, chief executive of Product Launchers, a distributor for several small toy suppliers, said her clients were owed about $1.2 million from Toys “R” Us. She worries that they may recover as little as $120,000.

Shopping in a Toys “R” Us store. The company closed 350 of its stores across the country, but the retailer is still in business.CreditBebeto Matthews/Associated Press

“For some of these clients it was very devastating,” she said.

Nationally, professional fees for bankruptcies have been increasing about 9.5 percent a year, about four times the rate of inflation, according to Lynn LoPucki, a bankruptcy professor at the University of California, Los Angeles.

Mr. LoPucki said the higher fees were fueled, in part, by court shopping. Lawyers advising troubled companies tend to gravitate to courts that approve their fees, he said. Judges who balk at high fees see far fewer cases.

“They become pariah courts,” Mr. LoPucki said.

Down the road, creditors in the Toys “R” Us bankruptcy can challenge how many hours the lawyers bill at the high rates. Another check on the costs is the United States Trustee Program, which helps oversee the process and can object if the legal bill seems unreasonable.

The vast majority of companies — more than 76 percent — now file for bankruptcy in a different state from where they are based, Mr. LoPucki said.

Delaware and New York — which have long been popular bankruptcy destinations — still see the lion’s share of the filings.

But Richmond is gaining ground. In July, an article in The Virginia Lawyers Weekly declared the city a “bankruptcy haven” and quoted a local lawyer who said the high legal fees charged there would give judges in other courts a “heart attack.”

Then in September, the court landed the Toys “R” Us bankruptcy.

Toys “R” Us started out in 1948 as a company that sold cribs and strollers out of the ground floor of a house in Washington, D.C.

It expanded into the world’s leading toy retailer with about 2,000 stores and an advertising jingle — “I Don’t Want to Grow Up, I’m a Toys ‘R’ Us Kid” — that could stick in its customers’ heads like glue.

Seeing opportunity in a consolidated toy industry, the private equity investors Bain Capital and Kohlberg Kravis Roberts and the real estate firm Vornado Realty Trust bought the company in 2005 and loaded it up with debt that today stands at $5.3 billion. It was a burden that proved too much to overcome.

Toys “R” Us has dozens of affiliates around the globe employing 64,000 people. But when it came time to file for bankruptcy, the company opted for Richmond, where its law firm, Kirkland Ellis, had success in the past.

The law firm had represented Patriot Coal, a coal miner based in West Virginia that filed for bankruptcy twice in four years, most recently in Richmond in 2015.

In that case, the most profitable mines went to another coal company backed by Patriot’s lenders, while the others were closed.

Mr. Barrett, the lawyer who represented the State of West Virginia in that case, was stunned by the fees.

“I remember five lawyers in one meeting, and I joked that meeting cost $10,000,” he said.

This year, Kirkland worked on another bankruptcy case in Richmond — Gymboree, the children’s clothing retailer, based in San Francisco.

Like Toys “R” Us, Gymboree was owned by private equity and was weighed down by debt.

After emerging from bankruptcy in September, the company closed 350 of its stores across the country, but the retailer is still in business.

The Toys “R” Us bankruptcy case kicked off in September at a packed hearing. Kirkland Ellis set the stage by playing the Toys “R” Us theme song for the judge.

The toy company, the lawyer explained, had tried to turn around its business. But it couldn’t afford to sufficiently spruce up its stores and compete with retailers like Walmart and Amazon because it had billions of dollars in debt. He emphasized how Toys “R” Us had brought joy to many children and how the bankruptcy process would help the company survive.

“We are all Toys ‘R’ Us kids,” he said.


“You’re going to see a lot of folks out here running from something,” said a man who identified himself only as Sunny. He posed with a stuffed animal of an amphibian named Fabian for a portrait in his R.V. in a Walmart parking lot in Asheville, N.C. He added: “For the first time in my live I’m not running from anything. I guess I was running from myself.” br /br /Sunny travels the country, but spends the in-between time in Asheville. This particular Walmart stopped allowing overnight stays months ago, Sunny said, so he spends afternoon and evenings there before moving elsewhere to spend the night.
The New York Times

Walmart’s practice of letting people populate many of its parking lots has made the retail giant’s stores a reliable destination and a place where an informal culture emerges before and after dark.

Tom Brenner/The New York Times
Crown Prince Mohammed bin Salman, center, at the Future Investment Initiative last month in Riyadh, Saudi Arabia.
Tasneem Alsultan for The New York Times

Prince Mohammed bin Salman is taking on all comers — the royal family, wealthy Saudis, Iran and Hezbollah. But is he ambitious or simply reckless?

Brynn Anderson/Associated Press
Law enforcement blocked off a road in Rancho Tehama, Calif., on Tuesday after a fatal shooting.
Jim Schultz/The Record Searchlight, via Associated Press

The police said there were at least seven separate shooting scenes in or near Rancho Tehama Reserve, and two children were among the wounded.

Barstool employees in their New York offices: Paul Gulczynski (left) and Francis Ellis.
Dina Litovsky/Redux, for The New York Times

The insurgent media company has built a devoted following of what it sees as “average” sports fans: unruly, occasionally toxic and aggressively male.


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Economic Scene: Considering the Cost of Lower Taxes

It is hard to understand the deep reasons behind the American aversion to taxes and government. Is it the vestigial expression of a rugged individualism born on the American frontier? Is it racial hostility — an unwillingness by whites to fund social programs that some believe unduly benefit minorities?

Bucking the Trend

While taxes in most of the wealthiest nations have taken an increasing share of the economy over the last half-century, the United States has largely been an exception.

Tax revenue as a share of gross domestic product

























Tax revenue as a share of gross domestic product


























By The New York Times | Source: Organization for Economic Cooperation and Development

And whatever apologists for small government might argue, there is no credible evidence that countries with higher tax rates necessarily grow less.

Over the last couple of weeks, Republicans have offered legislation to cut taxes by $1.5 trillion over the next decade — more than half a percentage point of G.D.P. They assert a dire need to stimulate growth by encouraging corporations to invest in the United States.

But Lawrence H. Summers, a former economic adviser to President Barack Obama, has asserted that the plan may instead “retard growth” and burden the middle class. Bruce Bartlett, who helped conceive the 1986 tax overhaul under President Ronald Reagan but has become a critic of Republicans, characterized claims that corporate tax cuts would increase the income of the middle class as “complete nonsense.”

Beyond this criticism, though, the debate offers an opportunity to look closely at the mechanics — and consider the motivations — behind the nation’s great divergence with the other market democracies of the West.

Austria, Belgium, Greece, Hungary, Luxembourg, the Netherlands and Norway approved or carried out comprehensive tax reforms last year, according to the O.E.C.D. Other countries also enacted more piecemeal changes. With the exception of Greece, which is under German pressure to cut its budget deficit, they have all aimed at stimulating growth.

Many of these efforts are likely to reduce income-tax revenue, as the Republicans’ plans would. But the larger goals are radically different; they are also meant to enhance equity.


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Of 15 O.E.C.D. countries that changed their top income-tax rates for 2016 and later years, nine increased them and only six reduced them, the O.E.C.D. found. Most of the tax cuts were aimed at those below the top tier of earners: over all, 19 countries cut marginal income-tax rates for those not in the highest bracket, aiming to increase the take-home pay of average workers.

Construction equipment being produced at a metalworking shop in Japan. Citizens of many of the poorer, little-taxed countries of the 1960s, like Japan, today pay a much larger share of their incomes in taxes than Americans do. Credit Kentaro Takahashi for The New York Times

Belgium eliminated its 30 percent tax bracket, the second highest, and raised the income threshold of the lowest bracket of 25 percent. In Austria, rates were reduced for all but top earners, whose marginal rate rose to 55 percent, from 50 percent. Canada and Luxembourg also aimed tax-rate cuts at middle-income earners.

At the bottom of the income distribution, Belgium, Britain, Germany, Norway and the Netherlands all increased the ranks of those owing no tax. Austria also expanded its tax credits, while Finland and the Netherlands increased the top payout of the earned-income tax credit, and Ireland introduced such a credit for the low-income self-employed.

To be sure, many tax changes in other rich countries benefit the rich. Inheritance taxes have declined in several other O.E.C.D. nations. The Republican proposition to cut corporate tax rates is hardly out of line: Most other advanced nations are doing the same thing.

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Still, reforms around the O.E.C.D. do not look quite like the American giveaways. For instance, countries that have cut corporate tax rates have also raised taxes on dividends — shifting the tax burden from corporations to their shareholders, and collecting the tax revenue somewhere.

I have written about this country’s uniquely stingy tax policy before. Small government, I believe, has proved to be no match for its social ills, too puny to offer much resistance to rampant inequality, stubborn infant mortality or off-the-charts opioid addiction. American voters’ uniquely intense hostility toward trade can, in the same way, be traced back to the government’s ineffectiveness in mitigating trade’s disruptions.

Republicans seem to believe that the best prescription to address the nation’s ills is to slash some $50,000 from the taxes of people earning a million or more. As Isabel V. Sawhill and Eleanor Krause of the Brookings Institution note, the estate tax could generate $1 trillion over a decade just by raising the rate and cutting the exemptions to where they were in the 1970s. Raising the exemption on the estate tax to $11 million, as Republicans propose, will help only a narrow sliver of ultrarich Americans.

It is hard to conclude that the Republican proposal is about anything but that narrow sliver. If it succeeds, it will transform the United States from a low-tax country to a lower-tax one. And the mystery will persist: In cutting taxes as babies die and adults waste away in addiction, what do Americans mean by nation?

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Haste on Tax Measures May Leave a Trail of Loopholes

■ An incentive to invest in slipshod, money-losing ventures would be created by the combination of a new proposal to immediately expense investments with the Senate’s suggested delay in the corporate tax cut.

■ Rules designed to prevent highly paid doctors, lawyers and other service providers from cashing in on new benefits aimed at small businesses can be easily circumvented.

Even those who applaud the aim of reducing the corporate tax rate and transforming the way global profits are taxed worry that specific provisions will miss the mark.

Republican leaders, responding to political pressure to move quickly, defend the process, saying Congress has held dozens of hearings on tax reform in recent years.

Tax bills, by nature complex, are shaped by a galaxy of competing pressures. And withholding details until the final vote as a way of shielding the legislation from special interests is not a new strategy.

Help Us Spot Loopholes in the Tax Plans

we’re asking for your help to identify loopholes, unintended consequences or errors in the Senate and House tax proposals.

Yet several veterans of previous tax battles argue what is different this time is the mix of breakneck speed and enormous scope.

The Congressional Budget Office said on Monday that Congress’s nonpartisan Joint Committee on Taxation has not yet had enough time to analyze the full economic impact of the proposals.


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One of the plans’ most radical changes is a shift from a worldwide system, where profits are taxed no matter where they are earned, to a territorial system, which exempts profits earned outside the United States. That would bring the American tax system in line with those in most other nations.

Because the switch could end up encouraging American companies to move even more profits offshore to avoid paying any domestic income tax, both the House and Senate versions of the bill impose rules to deter most multinationals with annual revenues of more than $100 million from exploiting such tactics.

But the effort to catch the giants under the new territorial system sets a financial bar that small and medium-size businesses can limbo under. Mr. Shay said accounting firms were likely to start marketing off-the-shelf tax shelters allowing companies to set up foreign offices in low-tax countries like Bermuda or Luxembourg to shrink their tax bills.

“They’re just opening us up to the next round of tax shelters on the international side,” he said. “And the I.R.S., underfunded as it is, isn’t going to be able to check anything.”

At the same time, he said, some safeguards aimed at multinationals could still be bypassed. To reduce their home tax bill, companies like Google and Pfizer, for instance, often relocate patents and copyrights in tax havens and then sell use of that intellectual property back to their American subsidiaries at eye-popping prices. These are the higher-than-normal profits — which Senate bill drafters have cunningly called “Gilti” (for global intangible low-tax income) — that Republican bills are trying to stop from leaking out of the tax system.

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Multinationals, though, could avoid some of the Gilti tax by shifting more tangible property like production and research facilities abroad.

Other problems arise from the push to reduce the rate on pass-through businesses (sole proprietorships, partnerships and S corporations that currently pay taxes at the individual rate). Lawmakers have advertised the cut as relief for smaller businesses, but high-income investors in hedge and private-equity funds could use the provision to reduce the tax paid on rent and interest income by as much as a third.

Hedge-fund investors have an additional opportunity for a windfall with a simple reporting technique, said Steven M. Rosenthal, a senior fellow at the nonpartisan Tax Policy Center and former legislation counsel with the Joint Committee on Taxation. The funds’ decision to mark their trading positions at their market price (instead of their initial purchase price) would enable any gains to qualify for pass-through treatment at the newly reduced rate of 25 percent instead of being treated as short-term capital gains, at a top rate that nears 40 percent.

The pass-through changes present other tax dodges. Benefits for pass-throughs that provide services — like doctors, lawyers and accountants — are supposed to be phased out for individuals with incomes above $75,000 and for married couples with income above $150,000. But a firm could skirt that limit by creating multiple partnerships with different functions, with one providing services, and the other handling, say, licensing or leasing, said Dan Shaviro, a professor of taxation at New York University Law School who helped write the 1986 tax overhaul.

Senator Orrin Hatch of Utah, center, chairman of the Finance Committee, speaking about Republican tax legislation last week. With him, from left, were Senator Charles E. Grassley of Iowa, Senator Mitch McConnell of Kentucky, Treasury Secretary Steven Mnuchin and Gary Cohn, director of the National Economic Council. Credit Aaron P. Bernstein/Reuters

“There is not a single advantage this has, except for students of people like me, who will get paid more to figure out how to game the system,” he said.


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Individual proposals that might make sense on their own can also set off unintended consequences when paired together. Although the Senate’s plan to wait until 2019 to cut the corporate tax rate to 20 percent from 35 percent has infuriated some shareholders, it saves money so that Congress can reach its budget goals. Some tax experts go further and argue that any cut should be phased in over a 10-year period to smooth out investment and reduce windfall gains.

Yet enacting a 20 percent corporate tax rate to take effect one year in advance while allowing investors to immediately deduct their expenses at 35 percent operates like a subsidy, and could encourage investing in money-losing projects simply for a tax gain.

“That could lead to silly stuff where you have a loss before the tax, but a gain after the tax,” Mr. Shaviro said.

(He offered an example for the mathematically inclined. Normally no one would invest $100 to earn only $90 back. But under the Senate plan, where some business expenses could be immediately deducted at a 35 percent rate, you would get $35 back in 2018. So your actual cost is $65. By the time your $90 earnings are paid in 2019, though, the tax rate would be 20 percent. That would cost you $18 in taxes, and leave $72 in your wallet. So even though your investment lost $10, you are still coming out ahead: with $72 on a net investment of $65.)

Other experts pointed to constantly shifting cost estimates of proposals that suddenly gained or lost tens of billions of dollars overnight.

At the end of 10 years, the very safeguards that are supposed to prevent international tax avoidance actually lose money, according to the Joint Committee’s revenue estimates of the House bill, said Kimberly Clausing, an economist at Reed College. “This is a big giveaway in future years,” she said. “On net, the whole system is ineffective.”

The shortcomings are fixable to some degree, critics say, but the Republican strategy of pushing through a bill without Democratic votes before the end of the year — on tax rules that take effect a few weeks later — will not leave sufficient time.


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To some supporters, though, that’s the price of success.

“Will they find things that need to be fixed afterward because the process was moving so fast? Yes,” said Rachelle Bernstein, vice president and tax counsel at the National Retail Federation, which represents big chains like Macy’s and Saks Fifth Avenue.

But there are always technical corrections to tax bills after they pass, Ms. Bernstein said, and retailers have been waiting so long for a corporate rate cut that they don’t mind if it finally happens with an imperfect bill.

“It’s part of how the sausage is made, but it’s better to make this sausage than cut it off,” Ms. Bernstein said.

Correction: November 13, 2017

An earlier version of this article described incorrectly a statement from the Congressional Budget Office. The office said that the Joint Committee on Taxation had not yet had enough time to analyze the full impact of the proposals, not that the office expected that it would be unable to analyze the bill before a vote.

Follow Patricia Cohen on Twitter: @PatcohenNYT

Natalie Kitroeff contributed reporting.

A version of this article appears in print on November 14, 2017, on Page A18 of the New York edition with the headline: Haste on Tax Measures Risks Trail of Loopholes.

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Trump Again Wades Into Tax Debate, Suggesting Repeal of Obamacare Mandate

In recent weeks, Mr. Trump has called for including the repeal of the individual mandate in the tax bill. Doing so would save more than $300 billion over a decade and would allow Republicans to boast that they took a step forward in dismantling a law that continues to haunt them.

The Congressional Budget Office and the staff of the Joint Committee on Taxation estimate that repealing the mandate starting in 2019 would reduce federal budget deficits by $338 billion between 2018 and 2027 relative to C.B.O.’s most recent baseline.

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While many Republicans in the House and the Senate have echoed Mr. Trump’s desire to repeal the mandate, they have been wary of injecting the treacherous politics of health care into the debate over taxes.

In some cases Mr. Trump’s tweets on taxes have sowed confusion about the direction he wants to chart for the legislation.

The president said previously that he wanted Republican negotiators to allow for a higher individual tax bracket to make sure that the bill was sufficiently progressive. The House plan would keep a top rate of 39.6 percent for millionaires and the Senate plan has a top rate of 38.5 percent for high earners. But now Mr. Trump wants to lower the top rate while also giving deeper cuts to the middle class.

Although Mr. Trump must sign the eventual legislation, Republican lawmakers have shown a willingness to break with his wishes. Mr. Trump originally called for a 15 percent corporate tax rate, but Senate Republicans appear to have settled on a 20 percent rate that will be delayed by a year. Senate Republicans also have ignored Mr. Trump’s desire to fully eliminate the estate tax and, for now, they have not addressed the special treatment of “carried interest” that gives hedge fund managers and private equity partners lower tax rates on their income.

Mr. Trump’s latest suggestions come as the Senate Finance Committee is due on Monday to begin debating the bill and considering amendments, a process that should continue all week.

The repeal of the individual mandate was not on the list of 355 amendments that the committee released on Sunday night.

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Self-Driving Trucks May Be Closer Than They Appear

Drivers Training Trucks

One afternoon in Florida, a 59-year-old career truck driver named Jeff Runions sat alertly in the cab of an 18-wheeler watching the road while his 11-ton cargo of stone tile made its way up the Ronald Reagan Turnpike. He was watching his steering wheel, too, but his hands were at his side: A computer was in control.

Mr. Runions works for Starsky Robotics, a San Francisco start-up that for the past two years has been testing its self-driving technology by running freight up and down Florida. The runs help collect data and hone the technology, in hopes of convincing regulators and the company itself that self-driving trucks are ready for business.

There are still plenty of kinks. Sitting next to Mr. Runions was an Irish engineer named Rebecca Feeney Barry. As the vehicle spent hours driving past swamps and billboards for accident lawyers, Ms. Feeney Barry balanced a laptop on her knees and watched how the truck’s sensors interpreted the road and nearby cars.

At one point the computer’s “vision” briefly lost sight of the freeway because an overpass shaded the road. Later, the truck didn’t take a turn hard enough, prompting Mr. Runions to grab the wheel. Ms. Feeney Barry logged all of it. Later, after some computer code had been altered to tell the truck to tug the wheel a bit harder, it made a similar turn more smoothly.

“Sometimes it kind of messes me up when I go back to driving because now I’m used to the truck driving,” Mr. Runions said.

Starsky’s ultimate plan, of course, is to eliminate Mr. Runions’s job. But they do not want him to be out of one. Stefan Seltz-Axmacher, Starsky’s 27-year-old chief executive, foresees using self-driving technology to replace long-haul drivers on freeways, but having people like Mr. Runions navigate at either end of the trip with remote control consoles that look like an arcade racing game.

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Drivers would go off to work in offices and might spend their day driving trucks through the last few miles of several different routes in several different cities before heading home for dinner.

“One driver can drive 10 to 30 trucks per day,” Mr. Seltz-Axmacher said.

The March of Automation

Starsky’s vision of a remote operation is unique. But the basic idea — having trucks drive themselves on highways and letting human drivers take over in complicated city environments — is something of an industry consensus.


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“One of the big misconceptions about self-driving technology is that it is going to emerge and be able to drive all the time in all circumstances,” said Alden Woodrow, the product manager for Uber’s self-driving truck unit.

As part of their partnership, Embark, Ryder and Electrolux are conducting what amounts to elaborate dry runs to imagine what self-driving-truck routes will look like. The runs start with human drivers leaving an Electrolux warehouse in El Paso and driving to the edge of the city, where they hitch the trailer to one of Embark’s autonomous trucks.

From there the truck drives itself for 650 highway miles (with a safety driver in tow) to Ontario, Calif., where the Embark drivers transfer their trailer to another Ryder driver, who drives the final few miles to one of Electrolux’s California warehouses.

“It’s a mirror of what we would do if there weren’t a driver inside,” said Mr. Rodrigues, the Embark chief.

A few miles from Google’s headquarters in Mountain View, Calif., a company called Peloton Technology is betting that there is a business to be built in a less radical version of automation. Peloton is on the cusp of rolling out a system that will make it easier and safer for trucks to travel one after the other on the highway, in a formation called platooning, helping them save gas by reducing wind drag.

Trucks with drivers already do this. But Peloton’s technology aims to make platooning safer with a mix of cameras, sensors and networking equipment, allowing the trucks to talk to each other and helping to prevent the second driver from ramming into the first truck after a sudden stop.

Josh Switkes, the company’s chief executive, said that because Peloton’s technology helps drivers get better at doing something they are familiar with, he thinks it can be quickly commercialized.

“Our basic approach is let’s bring real value to the fleet and society now,” Mr. Switkes said.

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Plugging Into the Gig Economy, From Home With a Headset

While critics of the arrangement cite rising insecurity, some of Liveops’ star agents — like Emmett Jones in Chicago, who knows of his rivals primarily as numbers on a leader board — say the opportunity has been transformative.

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The start-up has undertaken an extraordinary experiment in behavioral science to subtly entice an independent work force to maximize company revenue.

The earnest gratitude of the agents assembled here, not far from the Raleigh-Durham Airport, affirmed that. To them, Liveops is a sustaining force, a way to earn a living while being present at home. A few had driven hours to attend. Many brought friends and family members who were considering joining “Liveops Nation,” too.

There were icebreakers (“Liveops Nation Bingo”). Gift-card raffles (“$150?” the chief executive quipped. “Who approved these things?”). Free enchiladas. Everyone was invited to schmooze.


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“John, I heard your story about how you got to us is pretty great,” said the master of ceremonies, an impossibly sunny woman named Tara. “Would you mind telling all these people?”

When the mic came to John, a former insurance claims adjuster with a gray beard and several earrings, there was a sense of imminent revelation.

“I was working in another glass box over near here for six years,” he began. “I reached the point where it was either jump off the roof or walk out the front door.” The other agents laughed knowingly.

He continued: “My commute now is I walk down the hall, close the bedroom door behind me.” More laughter.

Then John’s voice softened: “This is good, this is good. I get paid for when I’m working, instead of souring when you get paid for 40 hours and work some more. So, I’m here.”

“Awesome,” Tara said, applause drowning her out. “I feel like John’s story mimics a lot of what we hear from people.”

According to Greg Hanover, a longtime Liveops official who became chief executive this summer, the company’s goal is to make agents feel as if they’re part of a movement, not just earning a wage.

“Where we want to be with this is what Mary Kay has done, multilevel marketing companies,” Mr. Hanover said, referring to the cosmetics distributor and its independent sales force. “The direction we need to head in for the community within Liveops Nation is that the agents are so happy, so satisfied with the purpose and meaning there, that they’re telling their story.”

Tara Donato, a senior manager, speaking at a Liveops Nation event in Durham, N.C. Credit Erin Hull for The New York Times

It’s an ambition that feels almost radical compared with Uber, whose best-known exercise in worker outreach is a video of its former chief executive berating a driver. It was heartening to discover that on-demand work could be both financially viable and emotionally fulfilling.


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That is, until I began to speak with Mr. Jones and some of his Liveops competitors. The more you talk with them, the more you detect a kind of Darwinian struggle behind the facade of community and self-actualization. You start to wonder: Is there really such a thing as a righteous gig-economy job, even if the company is as apparently well intentioned as Liveops? Or is there something about the nature of gig work that’s inescapably dehumanizing?

Just the Right Tone

Mr. Jones, who lives in Chicago, was the top rated Liveops agent for an insurer called TruStage for much of this year.

An ATT technician for decades, he decided that he needed to be at home not long after his wife was diagnosed with vertigo in 2008. “I can’t work and be worried about how she’s doing,” he said.

A few years later, when his daughter told him of a friend who worked with Liveops, he was eager to sign up — but refused to send in his required voice test until it was close to perfect. “I must have did the voice test four or five times,” he said. “I wanted to make sure I gave the right tone that they were looking for.”

As a Liveops agent, Mr. Jones sells life policies to callers, often those who have just seen a television commercial for TruStage insurance. He estimates that he works roughly 40 hours each week, beginning around 8 most mornings, and that he makes about $20 an hour. He is such a valued worker that TruStage invited him to its headquarters earlier this year for a two-day visit by an elite group of agents, in which executives pumped them insights about how to increase sales.

Roughly two decades ago, Liveops and its competitors typically connected callers to psychic hotlines, and in some cases less reputable services. Such businesses had frequent spikes in call volume, making it helpful to have an on-demand work force that could be abruptly ramped up.

“The only thing people were interested in was the abandonment rate” — that is, the number of people who would hang up in frustration from being kept on hold — said Kim Houlne, the chief executive of a Liveops rival called Working Solutions, which she founded in 1996.


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The call center industry took a hit during the 2001 recession, when cost consciousness unleashed a wave of outsourcing to India. But within 10 years, many companies decided that the practice, known as offshoring, had been oversold. The savings on wages were often wiped out by lost business from enraged customers, who preferred to communicate with native English speakers.

“People don’t feel comfortable,” Ms. Houlne said, alluding to the overseas agents.

By the early part of this decade, quality was in fashion. The enormous amounts of data that companies like Liveops and Working Solutions collect allowed them to connect callers to the best possible agent with remarkable precision, while allowing big clients to avoid the overhead of a physical call center and full-time workers.

Today, in addition to sales calls, Liveops agents handle calls from people trying to file insurance claims, those in need of roadside assistance, even those with medical or financial issues relating to prescription drugs. The agents must obtain a certification before they can handle such calls, which sometimes takes weeks of online coursework.

Liveops goes to great lengths to attend to their needs, addressing technical-support issues, even answering agents’ emails to the chief executive within 24 hours.

Mr. Jones, like many of his fellow agents, thinks of himself as helping others in need. He said that many families will gather around a table after a loved one has died to discuss the burial. If the deceased relative had no insurance, he said, “A lot of times that table is going to clear.” If, on the other hand, he had even $2,000 in life insurance — the minimum that TruStage sells — “the family members are more inclined to say, ‘He did what he could, let me see what I could do to help out.’ You end up with $5,000 to $6,000. You can do a decent burial rather than none at all.”

Still, there is undeniably a brass-tacks quality to the work. Shortly after we hung up, I turned my attention to an assignment due that afternoon, only to receive more calls from Mr. Jones’s number. When I finally answered, he apologized for interrupting me, then came to the point. “I have a question for you,” he said. “Do you have life insurance?”

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‘Where the Price Point Is’

Like Uber, Liveops expends considerable effort calculating demand for its agents. For example, if an auto insurance company is running a commercial on ESPN, Liveops will ask the company’s media buyer — that is, the intermediary that placed the ad — to predict how many calls such an ad is likely to generate. Liveops will adjust that prediction, using its own data showing how many calls similar ads have produced from similar audiences during a comparable time of year.

And like Uber, the Liveops focuses on “utilization” — in the Liveops case, the percentage of working agents actually on a call. Depending on the client, Liveops strives for rates of 65 percent to 75 percent. Lower than that and the agents, who make money only when they’re on a call, will complain that they’re not busy enough. Significantly higher and the system is vulnerable to a sudden increase in demand could that tie up the phone lines and keep callers waiting.

Liveops asks agents to schedule themselves in half-hour blocks, known as “commits,” for the upcoming week. If the company expects demand to be higher than the number of commits, it sends agents a message urging them to sign up. (Uber does something similar, except without formal scheduling.) Sometimes it will even offer financial incentives, like a bump in the rate earned for each minute they’re on a call, or a raffle-type scheme in which people accumulate tickets for the giveaway of an iPad or a cruise.


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Again like Uber, Liveops relentlessly tests the effectiveness of these tools. Referring to financial incentives, Jon Brown, the Liveops senior director of client services, said, “We’ve zeroed in on exactly what we need for an agent to go from 10 to 15 commits, from 15 commits to 20 commits. We know where the price point is, what drives behavior.”

And then there are the performance metrics. Liveops agents are rated according to what are called key performance indicators, which, depending on the customer, can include the number of sales they make, their success at upselling customers, and whether a caller would recommend the service based on their interaction.

Liveops makes clear that its agents’ ability to earn more money is closely tied to performance. “You’ve heard the term meritocracy?” said a Liveops official named Aimee Matolka at the North Carolina event. “When a call comes in, it routes in to that best agent. Yes, our router is that smart. You guys want to be that agent, I know you do. Otherwise you wouldn’t be here.”

It allows the agents to track their rankings obsessively through internal leader boards. (Liveops officials say that while the pressures of the job can preoccupy agents, it is up to them how much time to invest.)

“I lost the No. 1 spot, now I’m No. 2,” Mr. Jones said in early August, acknowledging that he checks his ranking frequently. “I thought about researching to find out who it is — you always want to know who’s the competition — but I said leave it.”

He added: “I’m a competitive person. We just toggle back and forth. If they see me jump back in, they work harder. They want that spot back.”

‘This Is My Phone Call’

My flight to Bangor, Me., was due after 9 p.m., and apparently sensing my unease with the North Country, the firefighter seated next to me asked if I had to far to drive when we landed. “About three hours north,” I confessed. “Watch out for moose,” he said. I assured him I’d driven around deer before. He stopped me short: If you hit a deer, you’ll kill them, he said. If you hit a moose, they’ll kill you.

I found Troy Carter, the agent who had recently surpassed Emmett Jones, at his home in Fort Fairfield the next day, wearing jeans, a button-down short-sleeve shirt, and a New England Patriots hat. There were no shoes on his feet, only white socks.


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Like Mr. Jones, Mr. Carter said Liveops had been a blessing, allowing him to earn a living in a part of Maine so remote that my cellphone carrier welcomed me to Canada shortly after I pulled into his driveway.

When I told Mr. Carter that I had been in touch with his top competitor, he quickly pulled up the latest monthly rankings of Liveops agents selling TruStage insurance. He pointed out that while Mr. Jones, whom he recognized only by his identification number, 141806, had more sales — 87 to his 82 — he had far fewer paid sales, charged at the time of purchase rather than by invoice.

“The real thing is the paid application rate — they want it around 95 percent,” Mr. Carter said. “He has 87 sales, but only 65 percent paid, compared to my 94 percent.” This, he explained, was why he enjoyed the right to call himself the top agent for the month.

Mr. Carter is what you might call a serial entrepreneur. He once started an art supply website that folded within a few months, and a penny auction site called Bid Tree that foundered for lack of a marketing budget.

He sees Liveops, on which he spends 40 to 50 hours per week, as of a piece with these entrepreneurial efforts. In fact, it is something of a family business. His wife, Lori, handles incoming calls while he’s busy with customers. “I’m a housewife/secretary/receptionist,” she said. Even Mr. Carter’s 9-year-old son, Logan, plays a role. “At nighttime, he says the last part of his prayer based on how many sales I did today,” Mr. Carter said. “If it was a lot of sales, he’ll pray, ‘Dear Lord, help my dad get the same amount of sales tomorrow.’”

Though Liveops agents work from a script, Mr. Carter, like Mr. Jones, adds his own flourishes. Before asking a caller’s gender, as he is required to do, he will say, “Now I already know the answer to this question, but please confirm if you’re male or female.” Upon receiving the answer, he will pause momentarily before saying, “I told you I already knew the answer,” and break into a laugh.

He might make this identical joke, with identical timing, dozens of times in a workday. “It’s like a comedian has a little pause before a joke,” he told me. “It relaxes them right off.”

Even with these touches, results can vary widely. Two days earlier, Mr. Carter had made seven sales, only a few shy of his record. The day I turned up, he managed only one. He said some callers had the impression they could receive $25,000 of insurance for $9.95 per month — the commercial mentions both figures — and begged off when Mr. Carter told them that their premiums would be substantially higher.

Troy Carter, right, sells life insurance from his home office in Maine as a freelance agent working through Liveops. Credit Matt Cosby for The New York Times

Mr. Carter has done research on how to comport himself, including watching an instructional YouTube video by the former stockbroker who was the subject of the movie “The Wolf of Wall Street.” He believes the key is to come off as the alpha presence. “The one that asks the most questions is the one in control,” he said. “If they ask me questions — ‘How are you doing?’ — I’ll come back, ‘The question is how are you doing?’ This is my phone call, as much as I can make it.”


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But on this day he repeatedly ran up against the limits of his powers. Even those who remained interested after 10 or 15 minutes of painstaking back-and-forth often demurred when Mr. Carter asked them for payment information. “This one guy was outside in a wheelchair,” Mr. Carter said of a caller who couldn’t produce his credit card. “He didn’t want to go in and get it. I said, ‘I’m fine waiting,’ but I can’t push him.”

These setbacks only seem to make Mr. Carter focus more. At one point, he made a swiping motion between his face and his headset with his index finger and middle finger. “They recommend that you keep the microphone two fingers away,” he said. “I’m always doing that — checking that it’s two fingers. I’ll do that for the rest of my life.”

It seemed, all in all, like a grueling way to make the slightly more than $30,000 that Mr. Carter estimates he takes in before taxes. “The good thing is he can take hours off,” Lori told me. “But then he can lose his spot. It’s always a fight for the top.”

I was reminded of the Alec Baldwin monologue from the movie “Glengarry Glen Ross,” except that the prize for having the most sales wouldn’t be a Cadillac, it would be a set of steak knives, because the Liveops analytics team had calculated that agents would give nearly as much effort for a prize worth a small fraction of the cost.

Of course, unlike the salesmen in that movie, the Liveops agents can’t really be fired — the third prize — because they weren’t employees to begin with.

A while later, Mr. Carter described a recent initiative in which agents were promised a bonus if 95 percent of their collective sales were paid up front. “I knew it wasn’t going to work as soon as they said it,” he told me, because a handful of agents with low paid rates could ruin everyone else’s chances.

“They did do a pullover sweatshirt for the top two,” he added, brightening. “I was second, so that’s coming.”

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Vietnam, in a Bind, Tries to Chart a Path Between U.S. and China

“Xi Jinping’s ambitions are dangerous for the whole world,” General Cuong said. “China uses its money to buy off many leaders, but none of the countries that are its close allies, like North Korea, Pakistan or Cambodia, have done well. Countries that are close to America have done much better. We must ask: Why is this?”

As with other Southeast Asian nations acutely aware that they are positioned in China’s backyard, Vietnam is worried about American inattention.

In the name of halting Communism, the United States once sent troops to Indochina and propped up dictators elsewhere in Asia. But the American-devised security landscape also created a stable environment in which regional economies expanded.

A furniture factory in Ho Chi Minh City, Vietnam. “As Vietnamese, we are always trying to find a way to balance China’s power,” said Nguyen Ngoc Anh, a professor at the Foreign Trade University in Hanoi. Credit Christian Berg for The New York Times

Now, Mr. Trump’s decision to take the United States out of the Trans-Pacific Partnership trade pact, which would have given 11 other economies an alternative to a Chinese-led economic order, has left the Vietnamese feeling vulnerable.

“As Vietnamese, we are always trying to find a way to balance China’s power,” said Nguyen Ngoc Anh, a professor at the Foreign Trade University in Hanoi. “For us, TPP isn’t just an economic issue. It’s also about geopolitics and social issues.”

Ms. Anh noted that local liberals had cheered the trade pact because it would have forced Vietnam to adhere to international labor and government accountability standards that Hanoi might otherwise not meet.

With the 11 other members of the pact still hashing out if they can proceed without the United States, Washington’s withdrawal — not to mention Mr. Trump’s “America First” speech at the APEC meeting on Friday — leaves some nations wondering if their best option may be Chinese-backed trade pacts and financing deals that have fewer guarantees for workers and less official transparency.


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“We are both Communist countries, but people like me in Vietnam don’t want to develop the same way that China has,” said Ms. Anh, who studied economics in Soviet-era Czechoslovakia. “We want to follow the Western-oriented way.”

While the United States is the largest market for Vietnamese exports, Vietnam’s biggest trading partner is China. Yet Vietnam runs a significant trade deficit with its populous neighbor, and Vietnamese economists worry that China doesn’t play fairly.

“China is one of the few countries in the world that doesn’t observe international law in many areas,” said Le Dang Doanh, an influential economist who has advised members of the Vietnamese Politburo on trade.

The Vietnamese watched in alarm last year when Beijing reacted to an international tribunal’s dismissal of China’s expansive claims over the South China Sea by ignoring — and even mocking — the judgment. Vietnam and four other governments have claims of their own on the resource-rich waterway that conflict with China’s.

A Chinese frigate in the South China Sea. Vietnam and four other governments have claims on the resource-rich waterway that conflict with China’s territorial demands. Credit Bryan Denton for The New York Times

It is hard to overstate the level of Vietnamese antipathy toward China. In a country where public protest is rare and risky, some of the few large-scale demonstrations in Vietnam in recent years have been against the Chinese.

But this national aversion puts Vietnam’s leadership in a bind. It cannot ignore China’s growing economic magnetism. For many members of APEC, China now ranks as their No. 1 trading partner.

In return for investment and project financing — roads, railways, dams, airports and colossal government buildings — leaders of regional economies are increasingly doing Beijing’s bidding.

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Cambodia and Laos have given crucial support for Beijing’s South China Sea claims. Thailand has complied with Beijing’s demand that it return Chinese dissidents who once counted on it as a haven.

Even the Philippines has appeared to yield, despite the fact it lodged the successful South China Sea suit at The Hague. Days before Mr. Trump’s visit to Manila this Sunday, it disclosed that President Rodrigo Duterte had ordered construction halted on a disputed sandbar in the South China Sea, a move widely regarded as intended to placate Beijing.


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Since taking office last year, Mr. Duterte has deemed the era of American military and economic pre-eminence over, and has called China his country’s best and faithful friend. He has been rewarded with billions of dollars in infrastructure investment from Beijing.

“The U.S. has been playing catch-up to China’s charm offensive since the turn of the new century,” said Tang Siew Mun, who heads the Southeast Asia center at the Iseas-Yusof Ishak Institute, a think tank in Singapore.

Vietnam, more than any other country, has grown practiced at divining when not to challenge the two Pacific powers — both of which it fought within the last half-century.

People exchanging Vietnamese dong and Chinese renminbi near Vietnam’s border with China. While the United States is the largest market for Vietnamese exports, Vietnam’s biggest trading partner is China. Credit Linh Pham/Getty Images

In the 1970s and 1980s, China seized spits of land in the South China Sea that Vietnam had controlled or that were unoccupied but claimed by Hanoi.

Yet perhaps sensing an American reluctance to confront China in the South China Sea, Vietnam has declined to take China to international court, as the Philippines did, even as the Chinese have turned disputed reefs and sandbars into militarized islands.

Chinese pressure continues, despite the United States’ supplying the Vietnamese Coast Guard with a cutter and new patrol boats.

This year, a Spanish company with prospecting rights from Vietnam suspended drilling in an oil block off the coast of Vietnam. Beijing claims part of the waters as its own.

In 2014, the Chinese parked a state-owned oil rig off Danang, where Mr. Trump attended the APEC summit meeting on Friday, in a forceful incursion into what Hanoi considers its territorial waters.


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“Living next to China, which has ambitions to become the most powerful country in the world, is not easy,” said Vo Van Tao, a popular political blogger. “To lower the heat, Vietnam needs to withdraw from areas that belong to Vietnam.”

Grand strategy is beyond the worldview of Vietnamese like Do Van Duc. In 1979, he was stationed on the border with China, as part of an antiaircraft artillery unit, when hundreds of thousands of People’s Liberation Army soldiers from China flooded south.

The Vietnamese, while outmanned, put up an unexpectedly robust defense. Within a month, the Chinese, professing that they had taught the Vietnamese a lesson for interfering in regional geopolitics, withdrew.

During the war with China, Mr. Duc was only 17 years old, but he came to understand one thing then that today, as a security guard living in Hanoi, he said he still clings to.

“We cannot trust the Chinese,” he said. “They are our ancient enemy, and that will not change.”

Follow Hannah Beech on Twitter: @hkbeech.

Chau Doan contributed reporting.

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California Looks at Republican Tax Measures and Sees Payback

The bills would phase out the ability to deduct personal casualty losses from wildfires and earthquakes — a constant threat in vast parts of the state — but keep the deduction for damage from hurricanes and floods like those in Florida and Texas this year.

“I would like to think that this isn’t directly aimed at California, but it’s hard not to think that Congress has their sights set on the Golden State,” said State Senator Mike McGuire, a Democrat whose district includes areas ravaged by the recent wildfires in the north. “No matter if it’s an earthquake, a wildfire or a hurricane, families should be able to deduct the damage.”

California is overwhelmingly Democratic. Hillary Clinton outpolled Mr. Trump by nearly four million votes here, and Democrats control both houses of the Legislature. Party leaders have been at the forefront of denouncing Mr. Trump’s policies on issues from the environment to health care.

There has long been concern here that the state’s confrontational stance toward the Trump administration could invite retribution from Washington.

Gov. Jerry Brown, a Democrat, said in an interview that the rush by Republicans to pass a bill made it impossible to judge how much the legislation could hurt the state.

“I can’t penetrate the inner motivations of the Republican leadership,” Mr. Brown said. “But I will say there is something very odd about their rushing this very gigantic tax proposal through Congress without serious transparency or debate. They are doing so primarily, it seems, to reward their corporate donors.”

“I don’t like this way to govern in a democracy,” he said.

Representative Darrell Issa, whose San Diego County district is among the most vulnerable Republican seats in the state, said he would oppose the bill.


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“I cannot endorse changes that may make the tremendous burden felt by California taxpayers even worse,” he said. “Tax reform should lower taxes for all taxpayers — regardless of where they live.”

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But so far, Mr. Issa’s opposition appears singular within the state’s Republican delegation, at least among those who will offer comment. Representative Kevin McCarthy, the majority leader, who represents a Central Valley district, strongly backed the effort. He said other parts of the bill — such as increasing the standard deduction and eliminating the alternative minimum tax — would help California taxpayers who were, he said, saddled with high state taxes.

State Senator Jeff Stone, a Republican, also endorsed the effort, saying it would bring welcome relief to California taxpayers.

“The Democrats keep raising taxes in California,” he said. “It’s about time the federal government stops letting them off the hook by giving them cover with an overly complicated federal tax system.”

On the Democratic side, Anthony Rendon, the Assembly speaker, called the bill “anti-California,” and said he was surprised that so few California Republicans had spoken against it, especially in contrast to Republicans in other states, like New York, that would also be hurt.

“It’s to a large extent political suicide for a lot of these folks,” he said, “and they don’t seem to care.”

Like everything in the tax measure, affordable-housing credits are a moving target. The House version eliminated a lot of things, and the Senate version restored some of them. But as Republican legislators shape a bill that delivers a big cut in corporate taxes while remaining within deficit limits that allow a party-line vote, the houses have consistently looked at reducing credits and deductions whose ripple effects would be minimal in most of the country but profound for taxpayers who live, generally, in Democratic states.

For instance, both the House and Senate bills either reduce or repeal the deduction for state income, sales and property taxes. California’s top personal income-tax rate is the nation’s highest.

The House bill lowered the limit on the mortgage-interest deduction for new home purchases from $1 million in debt to $500,000. That move would affect fewer than 3 percent of mortgage holders nationally, and there are only four metropolitan areas in the United States where more than half of the homes are priced above $500,000. All four are in California. (The Senate bill keeps the limit at $1 million.)


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Also, no state benefits more from itemized deductions, which the bills limit, and in many cases discourage, by increasing the standard deduction. Economic models suggest that the bulk of the millions of families that would face tax increases under the legislation itemize their deductions.

More than a third of Californians itemize their deductions, according to data compiled by the Pew Charitable Trusts; the average benefit from those deductions was nearly $37,000 in 2015.

California is not the only state whose voters would lose deductions from the tax bill. According to an analysis by the Tax Foundation, an independent think tank, six states — California, New York, New Jersey, Illinois, Texas and Pennsylvania — claim more than half of the total amount deducted for state and local taxes.

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Senate Plan Could Increase Taxes on Some Middle-Class Workers

Both the House and Senate bills would cut the corporate tax rate to 20 percent from 35 percent and provide business tax benefits, such as the ability to immediately expense purchases of equipment.

The Times analysis, using the open-source software TaxBrain, found that roughly one-quarter of families in the middle class would see their taxes increase in 2018, by about $1,000 on average. By 2026, the share seeing an increase would rise slightly, to about one-third, and the average increase would rise to about $1,600. For the majority of middle-class families that receive a tax cut, the average savings would be about $1,300 in 2018 and $1,700 in 2026.

Who Will See Tax Cuts From Senate Plan?

Under the Senate bill, four out of five high earners would receive tax cuts in 2018.

Note: Includes all households, not adjusted for household size. | By THE NEW YORK TIMES

How Much Would People Save?

People across income brackets would see savings from the Senate plan in 2018. But for many in the middle class, the savings would be relatively small. The table below shows the average savings, by income, for those who would receive a tax cut.


The Times analysis defines the middle class broadly as those earning between two-thirds and twice the median household income, or about $50,000 to $160,000 per year for a family of three. To focus on families, the analysis excluded individual filers and households headed by people 65 or older and is adjusted for the size of each household.

Under the House bill, The Times has found, about half of middle-class families would pay more in taxes in 2026.

The analysis did not seek to calculate how workers might benefit from a steep cut in the corporate tax rate, which both the Senate and House bills would reduce to 20 percent from a top rate of 35 percent today, or project how the bills might increase economic growth and, with it, Americans’ wages.

On Friday, the independent Tax Foundation released an analysis of the plan’s growth effects. It projected that the Senate bill would increase gross domestic product by 3.7 percent over the next decade and raise wages by 2.9 percent across the economy.

For taxpayers earning more than $1 million a year, the Senate bill offers a more limited upside and downside than the House bill.


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The Senate bill is less likely than the House bill to yield tax increases for high-income Americans, in part because it cuts the top marginal personal tax rate, while the House bill creates a so-called “bubble rate” that would actually raise taxes on many high-salaried workers.

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The Senate measure would also produce a smaller average tax windfall for high earners than the House version, in part by offering less generous benefits for owners of businesses known as pass-throughs, which are not organized as corporations.

Under the Senate plan, “Americans are especially likely to face a tax increase if they have a smaller family, have mostly wage income instead of investment income, or claim some of the many deductions that the bill repeals, like those for state and local taxes and employee business expenses,” said Lily Batchelder, a professor and tax specialist at New York University Law School, who worked on economic policy in the Obama administration. “They are increasing taxes on many in the middle class, while concentrating their tax cuts on the wealthy.”

The Senate bill appears much better for the very wealthy than it is for the somewhat wealthy. About half of families earning between two and three times the median income — or about $160,000 to $240,000 for a family of three — would pay more in 2018 than under existing law. But among the richest families, those earning more than about $500,000 for a family of three, nearly 90 percent would get a tax cut.

The findings come with an important caveat: The Senate bill, as written, appears unable to muster the 60 votes needed to avoid a Democratic filibuster, meaning Republicans will need to amend it to comply with the budget reconciliation rules and allow permit passage by a simple majority. Those changes could likely include putting expiration dates on some of the bill’s major provisions, which could make the final version of the bill look less favorable to the middle class, particularly in later years.

The Times’s figures are based on an analysis of Census Bureau data using a tax model from the Open Source Policy Center, a Washington research organization affiliated with the right-leaning American Enterprise Institute. Because the analysis is based on publicly available data, not actual tax records, it may not capture all the intricacies of Americans’ household finances.

The Senate bill differs sharply from the House version in its approach to cutting taxes on businesses. But when it comes to taxes on individuals and families, the bills are more similar than different. Both would double the standard deduction while eliminating a raft of deductions and credits. Both would make the child tax credit more generous. Both would restructure federal income tax brackets to impose lower marginal tax rates at most income levels, although the Senate approach, unlike the House version, doesn’t eliminate two brackets entirely.

The Senate bill includes features that would make its plan more favorable to the middle class. It preserves some popular tax deductions and credits that the House bill initially would have eliminated, and it makes the child tax credit somewhat more generous and widely available. On the other hand, the Senate bill, unlike the House version, would eliminate the deduction for property taxes, which could lead to higher federal taxes for homeowners in areas with high property tax rates or expensive housing markets.

Aparna Mathur, an economist at the American Enterprise Institute, said senators could improve the bill with further changes, such as expanding the earned-income tax credit and extending the benefits of the child tax credit to more low-income taxpayers. “We clearly need to do more to help the lowest-income families,” she said. “At the same time, we can engage in more base broadening for the highest-income households, perhaps by eliminating and not just capping the mortgage-interest deduction.”


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The Times analysis found that roughly one-fifth of the Senate bill’s cuts in 2018 would go to families and individuals earning $1 million or more, and close to half would go to people earning at least $200,000. Between 10 million and 15 million taxpayers earning less than $100,000 a year would pay more than under existing law.

Families earning more than $1 million a year would see their after-tax income rise by about 1.7 percent in 2018 compared with what they would make under current law, nearly triple the gains enjoyed by those earning less than $200,000.

Over all, the Senate bill would cut individual income taxes by about $30 billion in 2018, and by $900 billion over the next decade, according to Congress’s nonpartisan Joint Committee on Taxation. And most people in all income groups would see a tax cut, although the cuts would be modest for most lower earners.

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