These are taxing times
Republicans in Washington, DC on November 2 unveiled details of their highly anticipated Tax Cuts and Jobs Act. Some Republicans in high-tax states such as New York have expressed concern about the elimination of the ability of residents to deduct their state income taxes from their federal taxes. Rep. John Faso has said he is “concerned” about that, but he seems fairly pleased with the rest of the package.
He writes on his website, “In the 19th Congressional District, approximately 32% of tax filers itemize deductions, typically for mortgage interest, charitable donations and state and local taxes. With the doubling of the standard deduction for married couples to $24,000, I expect a reduction in the number of taxpayers who chose to itemize deductions if this plan were adopted.”
That’s probably true. However, with the standard deduction doubled, people who opt to take it and not itemize their deductions will have less incentive to donate to tax deductable charities because they won’t be able to deduct the donation. So, people who depend on charities are likely to be negatively impacted by this element of the tax cut legislation.
Faso continued, “I also recognize that there will be attacks that this plan is only to help the ‘rich,’ and nothing can be further from the truth. The highest income earners will continue to face the highest taxes and the plan maintains the top tax bracket. Democrat critics need to revise their class warfare playbook as most benefits accrue to middle class taxpayers and small businesses.”
That’s clearly not true. An analysis by the Committee for a Responsible Federal Budget (CRFB) found that the tax plan would grant about $1.5 trillion in tax cuts to businesses over the next 10 years, but most of that would go to large corporations. And in fact, the National Federation of Independent Business came out as opposed to the plan, because it said, “This bill leaves too many small businesses behind. We are concerned that the pass-through provision (which allows cuts for entities such as limited liability corporations and partnerships) does not help most small businesses.”
The CRFB analysis also found that about $200 billion in cuts would go to very wealthy American families who would eventually have to pay no estate tax, which currently applies to estates of more than $5.49 million. So this clearly is a boost to wealthy people who don’t need additional wealth.
It has been widely reported that the overall cost of the legislation to the national debt will be about $1.5 trillion over 10 years. A week before the plan was unveiled, Republicans in Washington voted in favor of a budget that would take about $1.5 trillion away from Medicaid and Medicare over the next 10 years. While the budget is not a law, and several analysts say that budget will never become law, it’s clear that Republicans—if they could get away with it—would take a lot of money away from people who depend on benefits from those two programs and give that money to wealthy businesses and people who don’t need it. Looking at it from that view, it’s hard to see the plan as anything other than a plan to help the rich.
What else does the plan do? It takes away tax deductions for student loans, so once again it hits a vulnerable population. It takes away the deduction for high-cost medical expenses. It takes away the deduction for couples who adopt a child or children. These do not sound like cuts that would help the middle class.
Faso may toe the party line that the tax plan is intended to help the middle class, but the majority of people don’t believe it. According to a new Washington Post/ABC News poll released on November 3, 60% of respondents said that believed the tax plan favors the rich and only 13% believe it favors the middle class.
That’s also the view of Pennsylvania Sen. Bob Casey, who wrote, “Congressional Republicans have taken great pains to spin their tax scheme as great for the middle class, but a few marginal changes don’t change the fact that their plan is fundamentally a massive giveaway to the wealthy at the expense of the middle class.”
Sen. Chuck Schumer agrees. On November 3 he tweeted, “GOP argues their plan gives the middle class a tax break. What they won’t tell you is many middle-class families will see their taxes go up.” He’s predicting Republicans will have trouble passing their tax plan. But of course, that could just be wishful thinking.
This bill has the potential to hit a lot of people’s pocketbooks—and lives—hard and fast. The time to figure out what impact it will have is now, not after it has become law. We recommend that our readers do research now to see how they would be affected, and be sure to let their representatives know how they feel. [To let us know how you think the Tax Cuts and Jobs Act would affect you, take the poll on the front page of riverreporter.com.]