Nel's New Day

December 15, 2017

The Tax Bill Would Destroy Our Nation’s Future

Filed under: Legislation — trp2011 @ 11:13 PM
Tags: , , ,

The new tax bill, approved by a joint Senate/House committee in both congressional chambers, is ready for votes in both chambers this coming week with no experts testifying and no Democratic support.

Benefits for corporations: The permanent drop to 21 percent—40 percent of the rate during the 1950s—saves them $1 trillion in a decade. Corporations have not indicated any desire to invest these savings in the economy. Foreign income by U.S. companies would be tax-free. These cuts are permanent; those for individuals expire in nine years. Corporate cuts disproportionately help the wealthy because they are the share-holders.

Benefits for the wealthy: The highest tax rate for married couples making over $470,000 has been dropped 2.6 percent to 37 percent although DDT had said the bill would not cut taxes on the rich. DDT had said that his wealthy friends were complaining. Overall, 47.5 percent of taxpayers have an average increase of $150 in taxes, and 31.3 percent may get a reduction with an average of $1,500. This doesn’t reflect the cost of health insurance premiums.

Cuts for tax deductions: Only $10,000 in state, local, and property taxes can be deducted on federal income taxes, causing property values to fall in high-tax cities and leaving less money for public schools and infrastructure. The bill also prohibits taxpayers from prepaying next year’s state and local income or property taxes to prevent people from deducting them from 2018 taxes.

Increase in insurance premiums: The disappearance of an individual healthcare mandate will cause premiums for people not on the Affordable Care Act to rise and 13 million more people to be without health insurance in a decade. The elimination of the mandate doesn’t occur until 2019.

No estate tax under $22 million: Currently heirs don’t pay estate taxes under $11 million for married couples, but the new tax doubles that amount.

A 20-percent reduction for “pass through” companies: In S corporations, LLCs, partnerships, and sole proprietorships, income is “passed through” to the business owner’s individual tax return. The new bill invites a plethora of sham businesses for salaries to allow people to deduct 20-percent of their income up to $315,000 tax-free.

Drop in AMT (alternative minimum tax) for individuals: The tax began in 1969 to keep wealthy families from lowering their tax bill to almost nothing through credits and loopholes. The AMT level had not been changed, and couples earning over $84,500 may end of paying the AMT. The proposed threshold is $500,000.

No corporate AMT tax: This tax has kept corporate taxes close to 21 percent.

Drop in mortgage interest deduction: This deduction would be reduced from up to $1 million in mortgage loans to a cap of $750,000 for new loans.

Business perks: Additional tax relief for owners of engineering and architectural firms and the elimination of any change in capital gains treatment of home sales are among appeasements to business lobbyists and congressional champions.

Items left in place: The student loan deduction, the medical expense deduction, and the graduate student tuition waivers; retirement accounts such as 401(k) plans;

Churches, synagogues, mosques and other nonprofits (the Johnson Amendment stays in place) can’t get political and endorse candidates in elections or collect money for them with undisclosed donations.

Sen. Bob Corker (R-TN), who promised he would not vote for any bill that raised one penny of the national debt, is now in favor of a bill that increases the debt at least $1 trillion dollars (100 trillion pennies). Sen. Susan Collins (R-ME), who was earlier opposed to dropping off health insurance, seems fine with the bill predicted to do that to 13 million people. Sen. Jeff Flake (R-AZ), who caved on the last bill because he was promised that he could stay in a room where DACA might be discussed, is expressing doubt, but he can be expected to give in. Sen. Ron Johnson (R-WI) who voted against an earlier bill because he didn’t get enough money for his own business in Wisconsin must have gotten the money because he stated that the probably non-existent “economic growth” will be the way that “most Americans benefit from this tax reform.” Sen. Marco Rubio (R-FL) now approves after the new bill slightly expands a child tax refundable credit by $300 from $1,100. The child tax credit, doubling to $2,000, would phase out at $400,000 in earnings for married couples, up from the current $110,000.

Over 30 years ago, the 1986 tax reform bill may have dropped the corporate tax rate to 34 percent, but the reduction was covered by eliminating or reducing business tax breaks. Congressional sentiment was to have fewer tax loopholes and shelters for the rich to avoid an increase in the deficit. The capital gains increased from 20 percent to 28 percent because of the bipartisan belief that these taxes should be at least commensurate with ordinary income for workers. Not ideal, but far superior to the today’s GOP view of tax “reform” of giving money to rich individuals and businesses, taking from the poor, and driving up the deficit with the goal of eliminating earned benefits such as Medicare and Social Security.

The tax bill is like an oil spill: it will keep oozing bad news. Egregious pieces of the Senate bill may remain such as a tax exemption for cruise ships that dock in Alaska, a favor for Sen. Dan Sullivan; allowing luxury car dealerships to deduct interest on loans to showrooms for Sen. Rand Paul (R-KY); and a tax deduction for $10,000 of private school tuition.  A deduction for domestic manufacturing is gone, encouraging companies to move offshore. Fossil fuel drilling in Alaska’s Arctic National Wildlife Refuge stays.

Republicans have had enough time to play with their largely disliked tax scam bill, but they ignored CHIP (Children’s Health Insurance Program), insurance for 9 million poor children, that expired at the end of September. GOP leaders such as Sen. Orrin Hatch (UT) have sneered at people who need this insurance because they don’t work hard enough. Because of their indifference, young people won’t play basketball or join a dance team because they can’t afford an annual physical. Thousands more won’t have access to dialysis, surgery, or chemotherapy because the GOP believes that these children don’t deserve help. Meanwhile, they’re putting the same children into debt with a bill that gives money to the wealthy.

If the GOP wants to put the nation into debt by $1.5 trillion, they could stop child poverty, as Rachel West explains:

“According to the U.S. Census Bureau, the 5.7 million poor families with children would need an average of $11,400 more to live above the poverty line in 2016. In total, the income needed to boost these families—along with the additional 105,000 children who were not living with their families—above the federal poverty level is about $69.4 billion per year in today’s dollars. Over ten years, that adds up to about 46 percent of what Congress plans to spend on its tax plan. There would be so much money left over after we boosted these kids out of poverty that the United States could also pay tuition and fees for all of them to get an in-state education at a four-year public university, and it still wouldn’t costs as much as the tax plan. If Congress wanted to really let loose, and spend just 12 percent more than the tax bill does—for a total of $1.74 trillion—we could completely eliminate all poverty in America.”

Using the $1.5 trillion in this way would give a real boost to the economy. People could afford to buy things that other people would need to manufacture; people could buy services that would create more jobs. With all these jobs, the taxes would vastly increase in an upwardly spiral movement instead giving businesses the opportunity to take their $1 trillion out of the country.

Giving almost $1.5 trillion to the wealthy and businesses also takes away any chance for fixing the crumbling infrastructure throughout the United States. The bill gives no opportunity to repair highways, bridges, airports, railways, water and sewage plants, electrical grids—the list has grown more and more as taxes dropped in the last half century. Now the Republicans expect states to fix all the infrastructure form their meager state budgets, already weakened by increasing federal demands on them.

In the Washington Post, Fareed Zakaria wrote about the bill if it passes:

“The medium- and long-term effects of the plan will be a massive drop in public investment, which will come on the heels of decades of declining spending (as a percentage of gross domestic product) on infrastructure, scientific research, skills training and core government agencies. The United States can’t coast on past investments forever….

“United States has almost 56,000 bridges with structural problems (about 1,900 of which are on interstate highways), and these are crossed 185 million times a day….

“In 1977 the federal government provided 63 percent of the country’s total investment in water infrastructure, but only 9 percent by 2014. There’s so much congestion in America’s largest rail hub, Chicago, that it takes longer for a freight train to pass through the city than it takes to get from there to Los Angeles.”

The GOP tax bill would provide more of the same—more money for the wealthy taken from everyone else–and destroy any opportunity for a brighter future.

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