By TIM ROWDEN
House Republican lawmakers’ draft $1.5 trillion tax cut plan released recently would deliver a significant tax cut for corporations at the expense of working middle-class families.
Under the plan, business would receive about $1 trillion in net cuts, according to the Joint Committee on Taxation, including a permanent cut to the corporate tax rate to 20 percent from 35 percent — a change that is estimated to reduce federal revenues by $1.5 trillion over the next decade.
PUTS THE BURDEN ON WORKING FAMILIES
For working families, the plan would eliminate the alternative minimum tax, which is expected to hit 4.5 million families in 2017, and roughly double the standard deduction for middle-class families. It would not, as had been feared, make any changes to the pretax treatment of 401(k) plans.
That’s the good news. Now, the bad.
The bill, estimated to cost $1.5 trillion over a decade, includes a host of changes on the individual side to pay for the cuts, including repealing true middle class tax breaks for things like medical expenses, moving expenses, student loan interest and adoption, as well as making some business tax breaks temporary.
• Want a new house? The tax plan limits the mortgage tax deduction of $500,000 for new home purchases. Existing mortgages will be grandfathered.
“Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination this legislation appears to do just that,” William E. Brown, president of the National Association of Realtors, said.
• Have a student loan? Bad news. The plan repeals the deduction for student-loan interest.
• Have high medical expenses? You’ll find no relief. The Republican tax plan repeals the itemized deduction for medical expenses.
• Have children? The child tax credit would be increased from $1,000 to $1,600, but the $4,050 per child exemption would be repealed. The tax plan creates a new $300 credit for each person in a filer’s family who isn’t a child, but that tax credit would expire in six years.
• Considering adoption? You won’t get a tax break. The tax plan repeals the tax credit for adoption – because of “family values.”
• Retired on disability? The bill repeals a 15 percent credit for individuals aged 65 or over or who are retired on disability. Right now, those individuals can claim up to $7,500 for a joint return, $5,000 for a single individual, or $3,750 for a married individual filing a joint return. The House bill would entirely repeal that tax credit.
• On Medicaid or Medicare? The GOP budget cuts Medicaid by more than $1 trillion over 10 years – throwing some 15 million Americans off of their health insurance – and attacks senior citizens by proposing a $473 billion cut to Medicare.
• Pay a lot in local taxes? You’ll get hit twice. The House bill would limit the deduction to just property taxes, rather than state and local income taxes and general sales taxes, and cap the benefit at $10,000.
“Contrary to their assertions, the Republicans are picking winners and losers,” Jerry Howard, chief executive of the National Association of Homebuilders, told the New York Times. “They are picking rich Americans and corporations over small businesses and the middle class.”
TAX CUT FOR WEALTHY
For corporations, the plan slashes the tax rate on foreign profits, requiring companies to pay a one-time 12 percent tax on liquid assets held overseas, down from the current 35 percent rate which, contrary to President Trump’s campaign promises, will encourage corporations to outsource even more jobs and shift even more profits offshore.
“The Republican tax plan is a handout to millionaires, billionaires, and big corporations that will raise taxes on working families and give corporations new incentives to send more U.S. jobs overseas,” said Chris Shelton, president of the Communications Workers of America (CWA) “Republicans and White House staff have been working overtime to spin this deal as a ‘middle class tax cut.’ It’s not.”
What it is, is a tax cut for the wealthy.
The House plan will double the estate tax exemption to roughly $11 million, from $5.49 million, allowing families to avoid paying taxes on large inheritances, and will phase out the estate tax entirely over six years.
“The tax plan unveiled by House leadership would mostly benefit those who need the help the least: wealthy individuals and large corporations,” said J. David Cox Sr., president of the American Federation of Government Employees (AFGE).
“While the plan would lower the tax rate for many middle-income families, most would end up having more of their income taxed. And the plan would actually raise taxes on our poorest citizens.
“Too many American workers have been suffering from stagnant wages, rising costs for health care and other essentials, and an economic system that favors the millionaires and billionaires,” Cox said. “This plan does nothing to help them.”
GO BACK TO THE DRAWING BOARD
U.S. Senator Tammy Duckworth (D-IL) said lawmakers need to go back to the drawing board.
“I want to work with both Republicans and Democrats to pass tax reform that is comprehensive, fair and focused on helping Illinois’s small businesses and middle-class families,” Duckworth said.
“Unfortunately, the House Republican plan misses on each of these fronts. Their proposal would run up the deficit with massive tax cuts for large corporations and the very wealthy while leaving small businesses in a higher tax bracket and eliminating state and local income tax deductions that a third of hard-working Illinoisans rely on.
“The Republican tax plan would also hurt homeowners and the housing and construction industries, make it harder for students struggling to pay off the burden of student debt and make health care even more expensive, especially for those with chronic illnesses.”
(Information from the New York Times, the Progress Report and the Daily Kos.)