The more I read, the more I wonder why we in Waco would want either House or Senate versions of tax reform to pass. How can I not love them? Let me count the ways:
- First, the bills are touted as necessary decreases in corporate tax rates to be more competitive internationally. Yet most of the large U.S. corporations pay nowhere near the 35 percent rate. The largest ones have figured out, with coveys of lawyers, how to pay almost nothing.
- Then, supposedly, the ones holding billions of dollars in offshore accounts, just like some of the 1 percent holding millions and billions in offshore accounts (see the Panama Papers), will bring that money home because they will then have to pay less in taxes. That to me sounds like ransom payments made by the U.S. public to those hiding all this money in the first place.
- But, you might say, that money will lead to increased investment, more jobs and higher wages in the United States, all based on the dogma of supply-side economics, a dogma that has not worked since the Reagan years when top income-tax rates were cut from 70 percent. Many corporations are sitting on mountains of cash, yet fight against a $15 minimum wage for ordinary folks, which would sure help many in Waco, where chronic poverty remains widespread. Bringing those profits home will probably mean higher dividends and higher executive wages, most of which go to investor classes and groups. They likely would
- go to mainline employees who could actually drive up demand for goods and services and consequently create more jobs by having money to spend. There are lots of those sorts of employees here in Waco.
- Fourth, many of those who would invest that money and others in the finance industry continue to get a huge break by the lower tax on “carried interest,” a rate lower than paying income tax on capital gains. Moreover, the higher up the income ladder you go, the higher percentage of tax break you get. And there’s the estate tax, which the House would repeal and the Senate would cut, ensuring one class of Americans gets a bigger step up in life by birthright.
- Fifth, those selling their tax-reform packages say that median Texan households would receive $2,558 in tax breaks. The median household income in Waco is around $34,000. Most people making that income or lower (half of our city) do not pay that much in taxes already. The after-tax income of the top 1 percent would rise by 7.5 percent in 2018, while groups in the bottom 80 percent would see an income increase by between 0.8 percent and 2.4 percent (according to one CNN analysis). Read that carefully. That is the percentage of what you already make. Thus, 2.4 percent of $100,000 would be $2,400, 7.5 percent of $1,000,000 would be $75,000, almost 30 times more, and the comparison gets more dramatic the higher up the income range you go. The Alternative Minimum Tax, a tax to ensure that higher earners pay a fair share despite the amount of their deductions (and which President Trump has had to pay in the past), is repealed for both individuals and corporations.
Those earning between the top 1 percent and bottom 80 percent are prime candidates for seeing their income taxes rise.
- Sixth, if you need to deduct medical expenses because of nursing-home expenses or chronic illness, these are taken away (at least in the House version). That’s not a problem for high earners now because medical expenses must meet 10 percent of one’s income to qualify for the break and most high earners also have much better health-care coverage. Moreover, the tax packages cut about $1.5 trillion from Medicare and Medicaid to make the tax cuts work, so there’s no telling how that will impact health care in the future, especially as efforts continue to undermine the Affordable Care Act. And if that’s not enough, Senate Republicans decided to make a last-minute change, adding to the bill a repeal of the ACA’s individual mandate.
- Seventh, if you have a disability and want to be employed, your prospective employer loses a tax credit for hiring you.
- And, eighth, as reported by the Trib on Saturday, Waco attracts a lot of graduate students, who will now have to pay income taxes on the free tuition and stipends they usually receive as a part of their enticement to come. Most are struggling young professionals and families who are renters in Waco. And college students who borrow to go to college are losing deductions of interest on college loans.
In sum, it seems the tax packages, as they are now, will do more harm than good in the long run to a majority of people living in Waco. Plus add another $1.5 trillion to the national debt which, when the GOP resumes its traditional role as deficit hawk, will come back to haunt this party (and all of us). Not only that, but the legislation adds a conflicting twist to the notion that people and corporations are equal before the law — and arranges for expansions of the standard deduction and child tax credit and other provisions to expire after 2025 while keeping business tax cuts permanent.
Granted, I’m no economist or accountant, but I do worry a lot about debt and I have the individual and patriotic responsibility to pay for what we spend. Do your own analysis, but the packages seem like a raw deal to much of Waco.