RE: SENATE BUDGET RESOLUTION AND GOP TAX CUTS VOTE THIS WEEK

To: Editors and columnists
Date: October 17, 2017
From: Frank Clemente, executive director, Americans for Tax Fairness

As soon as this Thursday, the U.S. Senate is expected to vote on a budget resolution that would slash essential public services by $5.8 trillion while easing the way for consideration of the Trump-GOP tax cuts that will cost trillions of dollars and mostly benefit the wealthy and corporations. We urge you to write an editorial or column recommending that your home state senators vote “no” on the package.

The budget resolution will allow for a $1.5 trillion tax cut over 10 years that is not paid for by closing tax loopholes, meaning the costs will be added to the deficit. However, the non-partisan Tax Policy Center (TPC) estimates the costs of the tax cut at $2.4 trillion.

The ballooning of the deficit will jeopardize funding for Social Security, Medicare, Medicaid, education, and other services that America’s families rely on. Moreover, many middle-class families will get a tax increase under the plan.

This threat to the basic living standards of America’s families is not abstract. The Senate budget proposes $5.8 trillion in cuts to federal spending, including nearly $500 billion from Medicare and $1.3 trillion from Medicaid and other healthcare programs. Another $650 billion may be cut from income security programs, such as the Supplemental Nutrition Assistance Program (SNAP, or food stamps), Supplemental Security Income (SSI) for disabled individuals, and tax credits for working families, according to the Center on Budget and Policy Priorities.

The Senate budget cuts and tax cuts are stark in their inequities:

  • A $1.3 trillion cut to Medicaid and other healthcare programs vs. a $2 trillion cut in corporate tax rates.
  • An $800 billion cut to housing, infrastructure, education, medical research, and other non-defense “discretionary” spending vs. a $770 billion tax cut for hedge fund managers, Wall Street lawyers, real estate developers (like President Trump) and other wealthy owners of “pass-through” businesses.
  • A $473 billion cut to Medicare a $440 billion tax cut for the wealthy (including Trump) from eliminating the Alternative Minimum Tax.
  • A $200 billion cut to education, job training, and social services vs. a repeal of the estate tax costing $240 billion, which only benefits estates worth at least $5.5 million.

Go here for sources and more comparisons.

It’s worth noting that the tax plan’s corporate and business tax cuts make up the entire $2.4 trillion revenue shortfall estimated by the Tax Policy Center. The individual tax cuts are mostly paid for, although who pays is shifted from the wealthy to the middle-class. But corporate and business taxes, which are paid mostly by the wealthy, are reduced by $2.6 trillion over 10 years.

Republican acceptance of this huge increase in federal debt completely contradicts their policies and rhetoric going back decades. While most GOP members of Congress have consistently voted for budgets that slashed spending for services supporting working Americans, in the past they opposed spending increases or tax cuts that weren’t paid for. Some swing votes on the budget—including Senators Collins, McCain, Murkowski and Portman—co-sponsored a Balanced Budget Act that would have slashed trillions from Social Security and Medicare in the interest of fiscal discipline.

EFFECT OF THE TAX CUTS ON THE WEALTHY AND THE MIDDLE-CLASS

Based on the Tax Policy Center analysis, the richest 1% will get:

  • 53% of the total tax cuts in 2018 and 80% in 10 years
  • A tax cut of $129,000 in 2018 and $207,000 in 10 years, on average

They benefit so much because of the deep corporate and business tax cuts. The corporate tax rate is cut from 35% to 20%. (American corporations already pay just a 14% U.S. tax rate, according to the non-partisan Government Accountability Office, a result of many generous tax loopholes.)

The top business tax rate on pass-throughs (partnerships, S Corporations, sole proprietorships) is cut from 39.6% to 25%.

Fully 70% of corporate tax cuts go to wealthier Americans. Just 14% of business owners would benefit from the new 25% top rate, and only 4% of all taxpayers—the wealthiest business owners—would get this tax cut, according to TPC. 

By comparison, more and more middle-class families will get a tax increase under the Trump-GOP plan. According to TPC:

  • 3 out of 10 middle-class families making between $50,000 and $150,000 a year will pay more taxes by the tenth year.
  • It will cost them nearly $2,000 more, on average, depending on their income (range is $1,300 to $2,500).

The tax increases are due, in part, to the elimination of two tax breaks important to the middle class: the personal exemption, which is $4,050 per family member, and repeal of the deductibility of state and local taxes (SALT). The SALT deduction is used by over a third of taxpayers making $50,000 to $75,000 and by over half of taxpayers making $75,000 to $100,000, according to the Government Finance Officers Association. If SALT is repealed, federal taxes would jump by $1,800 for an average family in this last income group.

Go here for data on how the Trump-GOP tax plan effects your state’s residents – summarizing tax cuts for the 1% and tax increases for the middle class, the number of estates taxed each year, and the importance of SALT to your state’s middle-class taxpayers.  

FALSE CLAIMS THAT THE TAX CUTS WILL PAY FOR THEMSELVES

Advocates of the Trump-GOP tax plan claim it will generate significant economic growth and create many jobs. Some even say the plan will “pay for itself.” The president claims the corporate tax cuts will give workers a $4,000 wage hike—per his Council of Economic Advisers. Each of these claims has been thoroughly debunked.

  • Economists have widely discredited the White House claim that workers will get a $4,000 raise from cutting the corporate tax rate. They’ve criticized the methodology of the study and pointed to the large body of economic research that says the wealthy get the lion’s share of corporate tax cuts.
  • Corporate profits are already near record highs; corporate taxes are at record lows. Many corporations pay little to nothing in taxes due to tax loopholes, while sitting atop mountains of cash. Profits are mostly used to pad the pockets of top executives and wealthy shareholders through dividends and stock buybacks. If corporations are not investing the profits they have now in their businesses and employees, there’s no reason to believe they will use money from tax cuts to expand operations, hire workers or raise wages.
  • Rather than spur growth, these tax cuts for the rich and corporations could hurt the economy and cost jobs by causing big cuts to education, healthcare, infrastructure construction and other critical investments. Tax cuts for the rich and corporations create few jobs compared with investing in education, healthcare and infrastructure.
  • Huge tax cuts for the rich and corporations do not pay for themselves through miraculous economic growth. History shows that they just increase the deficit and force cuts to services while the rich get richer.

Even conservative economists reject the economic benefit claims being made by the White House:

  • Bruce Bartlett, a top adviser to President Ronald Reagan who helped craft Reagan’s 1981 tax cuts, has concluded, “There’s no evidence that a tax cut now would spur growth.”
  • Douglas Holtz-Eakin, former head of the Congressional Budget office, who as president of the American Action Forum is actively promoting the GOP tax plan, has conceded, “These tax cuts are not going to pay for themselves.”
  • Joel Slemrod, a University of Michigan economist who was another top economic adviser to President Reagan, has said: “Can tax cuts pay for themselves? The evidence overwhelmingly suggests that this is not true.”

The Trump-GOP tax plan, and the budget that will facilitate its passage and being voted on in the Senate this week, are bad for working families and bad for Main Street. The wealthy and corporations should not get one penny in tax cuts. Instead, they need to start paying their fair share so we can protect Social Security, healthcare, and public education from future cuts, as well as finance the investments needed to rebuild our infrastructure, improve education, expand health care, and research new medical cures. Such investments will create many more jobs than giving tax breaks to the well-off, and they will make working families much more productive and secure.

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