Last week, House Republicans released their plan to cut taxes for the super-rich and big corporations. The cuts come at a cost of $1.5 trillion: $1 trillion would go to businesses and corporations and nearly $200 billion would go to millionaire heirs and heiresses through the elimination of the estate tax. The plan calls for permanently slashing the corporate tax rate from 35% to 20%, what the Washington Post describes as “the biggest one-time drop in the big-business tax rate ever,” lowering the tax rate on “pass-through” business income, and eliminating the Alternative Minimum Tax (AMT), which prevents wealthy individuals from escaping tax liability.
Many middle-income families, however, will see their tax burden rise, and low-income families will receive no benefit from this tax plan. Instead, this costly giveaway to the rich could come at the cost of Medicaid, Medicare, and other programs that help families make ends meet. Here are five things to watch:
- The House Republican Tax Plan Could Increase Your Taxes
President Trump reportedly wanted to call the House Republican Tax Plan the “Cut, Cut, Cut Bill,” but the truth is that the proposed plan doesn’t deliver tax cuts for everyone. According to the nonpartisan Joint Committee on Taxation, the Republican bill would actually raise taxes on families earning between $20,000 and $40,000 per year. An analysis by the New York Times also found that under the House Republican Tax Plan, one-third of middle class families—defined as those making between $50,000 and $160,000 per year for a family of three—would pay more in taxes in 2018, and by 2026, nearly half of these families would be paying more.
Republicans supporting the plan have pointed out that the plan would raise the standard deduction, but it is important to look at the bill as a whole. In particular, the bill gets rid of personal exemptions and important itemized tax deductions upon which many middle class families rely, including deductions for medical expenses, basically taking away thousands of dollars in tax benefits designed for everyday people.
Even for wealthier individuals, though, the House Republican Tax Plan isn’t a total rosy picture. Consider the deduction for state and local taxes (SALT). Right now, tax filers can deduct what they pay in state and local income, property, and sales tax. Around thirty percent of taxpayers currently use the SALT deduction, with people making $200,000 or more utilizing it the most. The House Republican Tax Plan, however, would eliminate the SALT deduction for income taxes, impose a $10,000 cap on property taxes, and limit the mortgage interest deduction to loans of $500,000 or less. This proposal hits states like New Jersey, New York, and California particularly hard. Why does this matter? People with incomes between $200,000 and $500,000 per year will see their taxes go up, putting pressure to lower state and local tax rates.
The Center on Budget and Policy Priorities (CBPP) explains: “Repealing the [SALT] deduction would almost certainly make it harder for states and localities — many of which already face serious budget strains — to raise sufficient revenues in the coming years to fund K-12 and higher education, health care, and other services.” CBBP warns that repealing SALT could force cuts to state programs, make it costlier for states to borrow money, or result in increases in state and local taxes or fees that disproportionately impact middle-income people. CBBP concludes that repealing SALT, especially to pay for tax cuts for the super-rich and corporations, is “a bad deal for most Americans.”
- The Plan Makes Healthcare More Expensive
If Republicans should have learned anything from the fight to save the Affordable Care Act (ACA) it should have been that a majority of people in the U.S. do not think that the government should make healthcare more expensive in order to give tax breaks to the ultra-rich. But, alas, here we are.
The House Republican Tax Plan would eliminate the deduction for qualified medical expenses. Right now, an individual can deduct medical expenses that surpass 10% of their adjusted gross income—that includes medical expenses related to surgery, long-term care, or dental and vision care. Some 8.8 million tax filers claimed the deduction in 2015. The proposed tax plan, however, would strip this benefit—valued at over $80 billion—from individuals who, by definition, have very high out-of-pocket health costs. According to the AARP, three-quarters of those who use the medical expense deduction are 50 or older, and more than 70% earn $75,000 or less per year. Most of the qualified expenses are for long-term care. As women generally live longer than men, and are more likely to need or use long-term care, the repeal of this deduction could disproportionately hurt women and their families.
More generally, repeal of the medical expense deduction could threaten the economic stability of all people with disabilities and those with chronic illnesses. Even with health insurance, people with disabilities can face high out-of-pocket medical expenses. The House Republican Tax Plan will make it costlier to meet basic needs, whether it be accessing certain therapies or paying for accommodations that make independent living possible, such as a service animal or wheelchair, or receiving other specialized care.
- Millions of Children and Their Parents Would Be Excluded from the Expanded Child Tax Credit
You guessed it. Parents who work in low-wage jobs will not see any benefit from the House Republican’s proposed “expanded” child tax credit (CTC).
The House Republican tax plan proposes a $600 increase in the CTC, but that increase is not available to those who need it most—families struggling to make ends meet. And that’s a lot of families. Nearly six in ten workers in low-wage jobs are women, and many of them are supporting children. According to a 2014 study published by Oxfam America and the Economic Policy Institute, more than 15 million children live in U.S. households that depend on the earnings of a low-wage worker. More than 10 million of these children and their families would be excluded from the House Republican CTC proposal.
Right now, the maximum CTC is $1,000 per child, but the money is partially refundable, which means that part of the credit is available to families who earn too little to owe federal income tax. The proposed $600 “increase,” however is nonrefundable, meaning that it is not available to these low-income families. These families, who arguably need the CTC the most, are entirely left out. That’s already problematic, but instead of extending a helping hand to those who need it most, the House Republican Tax Plan makes the CTC available—for the first time—to many families with incomes between $150,000 and $300,000.
What does this all mean? A single mother of two children working full time for the minimum wage and earning $14,500 would receive no CTC increase, according to the CBBP. Yet, a couple with two children making $200,000 would receive a $3,200 CTC.
Child care is expensive, no matter what your income, and the CTC is not adequate to meet the need. For example, the average cost of infant care in New York is $14,144 for one child; the average cost in Colorado is $13,154 and $10,640 in Pennsylvania. Given the challenges lack of child care can create for parents seeking employment or pursuing educational opportunities, all families deserve affordable and universally accessible quality care; but wealthier families should not receive that support at the expense of lower-income families.
- The House Republican Tax Plan Would Make It More Difficult to Afford a College Degree
Even though millions of people in the U.S. are struggling with student loan debt, House Republicans still managed to propose a tax plan that would eliminate the student loan interest tax deduction, making it even harder for moderate-income individuals to make ends meet and afford their college or graduate degree.
Right now, tax filers with student loan debt who make less than $80,000 a year can deduct up to $2,500 of what they paid toward the interest on their student loans. More than 40 million Americans have student debt; and in 2015, the average borrower for undergraduate education owed over $30,000 in loans upon graduation.
The majority of student loan debt for recent graduates is now held by women. According to a study by the American Association of University Women, women are more likely to take on student debt (44% of undergraduate women versus 39% of undergraduate men), and women take on higher debt loads—on average 14% more than men across degree levels in a given year. Black women, in particular, take on more student debt on average than members of any other group. Women, and especially black women, are paid less on average than men, so in addition to having more debt, they have a more difficult time repaying their debt load.
Instead of helping families and individuals burdened by student debt, House Republicans are making it more difficult for them to make ends meet. Around 12 million people claimed the student loan interest deduction in 2015.
- Paying for Tax Cuts May Mean Cutting Medicaid and Medicare
If you thought the fight to save healthcare was over, think again. The House Republican Tax Plan would cost the federal government $1.5 trillion. How do Republicans propose that we pay for these tax cuts, the majority of which benefit corporations and the super-rich? The Senate Budget Resolution, passed along party lines, indicates that these tax cuts could be paid for by cutting Medicaid, Medicare, and federal spending on the Affordable Care Act.
The Senate Budget Resolution, which authorized $1.5 trillion in tax cuts also authorized $1.3 trillion in cuts to non-Medicare health programs—that’s Medicaid and the ACA—as well as a $473 billion cut to Medicare. As we all know, cutting these programs would especially endanger the lives of women, children, people with disabilities, and the elderly.
Already, the Trump Administration is reportedly pushing the House to include repeal of the ACA’s individual mandate in the tax plan. We’ve been down this road before. Repealing the requirement that people enroll in health insurance coverage or pay a tax penalty would increase the number of uninsured people by 15 million and raise premiums in the individual marketplace by 20%. It was a bad idea this summer, and it’s a bad idea now.