By Holly Straut-Eppsteiner
The Senate recently passed a disastrous tax bill, which represents a terrible deal for middle-class families and will disproportionately benefit wealthy filers and corporations. In addition to the fundamental unfairness in these tax breaks, Americans should be concerned about cuts in funding and access to health and safety net programs that millions of families rely on, which will be a direct result of the trillions of dollars the federal government will lose from this massive tax giveaway.
Republican legislators like Senate Majority Leader Mitch McConnell promise Americans tax breaks that will “put more money into the pockets of the middle class.” In reality, Republican tactics have amounted to a bait and switch ― providing minor concessions to appease middle-income voters as a red herring to push through substantial tax cuts that primarily benefit wealthy filers and corporations. Individuals with low and moderate incomes, in fact, will suffer under the bills passed by both the House and Senate. Corporate tax breaks will be permanent, but individual cuts will expire by 2025. A report by the Congressional Budget Office found that under the current Senate bill, filers with incomes under $30,000 per year will be worse off by 2019 and those who earn under $75,000 will experience a tax hike by 2027. Moreover, workers are unlikely to benefit from tax breaks benefitting their corporate employers. This week, the Senate is making changes to their bill to appease Senators who have withheld support. Nevertheless, we can expect that the bill’s fundamental structure will remain unchanged.
The tax cuts benefitting the wealthy will come at a tremendous cost to federal revenues, adding $1.5 trillion to the deficit over the next decade. Republicans explain away this debt using dubious and unsubstantiated claims that the cuts will pay for themselves through economic growth (they won’t). Republicans in Congress have openly admitted that spending cuts will be necessary. Senator John Kennedy (R-LA), for example, has stated, “There’s no way you’re going to be able to do tax cuts that pay for themselves.” Senator Rand Paul (R-KY) said, “My opinion has always been that you pay for a tax cut with spending cuts.” As a result of this bill, we can expect detrimental losses to health and safety net protections that working families rely on.
This has been particularly transparent in the Senate’s recent plan to repeal the individual mandate to fund corporate tax breaks. This repeal represents a full-on assault to defund the Affordable Care Act. As we enter into the holiday season, the ACA is something we should all be thankful for: since the passage of the ACA, nearly 20 million people have gained health insurance. Despite recent repeated efforts to fully repeal the ACA, enrollment rates are up 47 percent this year compared with the same period last year, with more than 1.5 million people having signed up for coverage during the first 11 days of enrollment alone. The Congressional Budget Office has estimated that repealing the individual mandate would increase the uninsured rate from 11 percent to 16 percent. This means by 2027, 13 million more people will be without health insurance. The repeal would also raise premiums by 10 percent and increase instability in insurance markets.
Although other spending cuts for crucial programs are not currently included in the legislation that enacts tax cuts, the Congressional budget resolution provides a vision of what to expect. The resolution called for $5.8 trillion in cuts to safety net programs over the next 10 years. These cuts will restrict access to health care, education, housing, and other basic needs for working families. Specific areas include $1.8 trillion in cuts to Medicaid, Medicare, and other health entitlement program, $653 billion in cuts to income security programs like the Supplemental Nutrition Assistance Program (SNAP), SSI, and TANF, and $800 billion to non-defense programs, including education, transportation, childcare, low-income housing assistance, services for the elderly, medical and scientific research, and environmental programs.
Safety net programs are critical sources of support for American families. Economists found that Medicaid has helped between 2.6-3.4 million people avoid poverty. Medicare supports 55.5 million seniors and adults with disabilities, more than half of whom had incomes less than $26,200 last year. Programs including SNAP, SSI, Housing subsidies, refundable tax credits like the EITC and Child Tax Credit, TANF, also have a powerful impact, lifting tens of millions of Americans out of poverty. Yet the new tax scheme by Congressional Republicans threatens the stability of these programs to benefit the one percent, who stand to gain the most from proposed cuts.
Despite progress in recent years, we have a long road ahead to end poverty in the United States: 40.6 million people remained living in poverty last year, including more than 13 million children and 4.6 million seniors. The share of the poor population living in severe poverty is at its highest rate since 1996. Meanwhile, the top one percent has experienced 160 percent income growth since 1979. If we are serious about overcoming poverty and improving the health and wellbeing of working families, Americans should be cautious not to be fooled by the empty promises of this tax bill and the threats it poses to critical programs over the next decade.
Holly Straut-Eppsteiner is a Public Policy Fellow at the Center for Community Change.