Yesterday, Senate Republicans began to unveil their version of the tax plan President Donald Trump wants to sign into law by the end of the year. Though they made some changes on top of the changes House Republicans made to the original framework, it still directs the bulk of the benefits to the wealthiest 1% of Americans. Despite Trump’s promises to “cut taxes for the middle class”, some middle class households may still end up paying more in taxes if the House or Senate Republican proposal becomes law.
Despite election losses, Republicans are still trying.
On Tuesday, Republicans lost state and local elections across the nation. Even worse for Republicans, voters on both coasts chose Democratic candidates who endorsed progressive tax reform to raise revenue. In addition exit polls suggest voters largely disapproved of Trump’s Presidency, and at least some of those voters in Virginia and New Jersey specifically based their decisions on opposition to Trump’s agenda.
At first glance, the election results seem to complicate Republicans’ already rocky road to pass the kind of tax cut package Donald Trump has insisted on. But now that conservative pundits are arguing that losses in Virginia, New Jersey, and elsewhere are due to Republicans’ failure to advance Trump’s agenda, Republican leaders insist they will meet Trump’s end of year deadline to pass some sort of tax bill.
What’s different about the Senate plan? So far, not much.
Though the Senate bill keeps in place seven personal income tax rates, it drops the highest income tax rate from 39.6% to 38.5%. It also includes a “pass through” provision to allow wealthy individuals to have some of their income taxed at the lower 25% rate that’s supposed to be for small businesses. And while the Senate plan doesn’t completely repeal like the estate tax, as the House plan does, it will effectively cut the tax that affects less than 1% of Americans.
The Senate plan lowers the corporate tax rate from 35% to 20%, just like the House plan, but delays implementation to 2019. Both versions also keep in place various loopholes that would bring the effective corporate tax rate even lower. Republicans have claimed that their bills will crack down on multinational corporations sheltering their profits overseas, but in reality both proposals would “crack down” on tax avoidance by effectively legalizing it.
The devil’s in the details. Or in this case, the deductions.
The House version of the Trump Tax Plan eliminates various deductions that benefit working families. The mortgage interest deduction tends to help more upper middle class taxpayers, but the medical expense and student loan interest deductions primarily benefit low and middle income taxpayers. House Republicans claim they’re expanding the child tax credit, but their “expansion” would actually leave behind at least 25% of children in low-income households, including over 40% of poorer children in Nevada.
Unlike the House tax bill, the Senate bill keeps in place the medical and student loan deductions. However, it goes further than the House bill in eliminating state and local tax deductions (SALT) that benefit middle class taxpayers and state and local governments. These changes will probably result in somewhat different numbers, but will probably still cause a significant amount of middle class families paying more in taxes by 2027.
How much would this tax plan actually cost?
Senate Republicans have insisted on keeping the cost of their bill under $1.5 trillion over the next 10 years. But like the House version of the Trump Tax Plan, the Senate bill uses various maneuvers to hide the true cost.
Despite Congress’ repeated failure to repeal the Affordable Care Act, Republicans are still considering repeal of the individual mandate that would result in 13 million more Americans without health insurance. That would, in turn, also result in higher premiums for those who continue to have health insurance.
Even though Republican leaders say their tax plan is just about cutting taxes, any final bill could ultimately set the stage for painful budget cuts ahead. Even if their tax package were to merely cost $1.5 trillion, that would still mean $1.5 trillion added to the federal deficit. Both the White House and Congressional Republican leaders have indicated they ultimately want to pay for these tax cuts with budget cuts that would target Medicaid, Medicare, public education, and even the kinds of public infrastructure that Trump promised to invest more in, not less.
Keep all of this in mind as Republicans continue to pitch the Trump Tax Plan. No matter how much they claim their plan “helps the middle class”, “pays for itself”, or “kills Trump’s bottom line”, the actual numbers tell a different story. And as the old saying goes, the numbers don’t lie.
Cover photo made available by the U.S. Air National Guard.