I must confess that, although my father was a CPA and I grew up in a household that revolved around tax season, I have zero interest in taxes. My husband and I pay them faithfully. We send the federal and state government our fair share because we believe our tax dollars should be used to ensure families who need it have a safety net for food and housing and healthcare and education. Except we know that’s not where most of our money goes. And while the Republican “tax cuts” being proposed may not hurt us personally, they will certainly not benefit most Americans.
Why do we need tax reform right now? Well, Trump and the Republicans needs a legislative victory and Trump’s wealthy friends in the top one percent want to pay even less of their fair share. While our president claims he would personally "get killed" financially by the GOP tax cut bill, I highly doubt that. You know who will “get killed” financially? My kids and their friends who are just getting by raising families, even with both parents working full time.
Let’s take a family like Donald Trump Jr.’s. Five kids, just like his father. Now let’s pretend the family is not filthy rich. Not even close to it. Let’s pretend the parents are both teachers with student loan payments. Add in that one of their children is on the autistic spectrum and another has a serious chronic illness (AKA, a pre-existing condition). They are exactly the type of middle-class folks who will supposedly benefit greatly from the tax plan proposed by the House and Senate Republicans and endorsed by the president. How will what I understand about the GOP proposed tax cuts help them?
Repealing the “death tax” surely won’t help because their father not is incredibly wealthy like Trump. Because they won’t be inheriting in excess of $5.5 million, repealing the estate tax will be of no benefit to them. It only affects the wealthiest Americans, who can easily afford to pay this tax for the common good. You can read about it here. Doing away with the estate tax is another way to perpetuate the income inequality that has gripped our country.
If our imaginary middle-class family with five kids has 401(k) retirement account, Republicans are thinking about limiting the amount of money the family can contribute each year on a pre-tax basis. This would hurt most families struggling to set aside money for the future, but it would also produce new tax revenues to help fund the tax cuts for the wealthiest among us. If the rich pay less, someone has to pay more.
Our middle-class family is lucky to have a modest home and therefore has a mortgage. Right now, mortgage interest can be deducted from the family income. To do this, the family has to itemize deductions. The GOP plan includes doubling the standard deduction, which would keep many middle-class taxpayers from itemizing. Once again, this will not hurt the wealthiest Americans because the mortgage interest deduction would only be available to higher-income people. In addition, our family can no longer take a deduction for property taxes, which are pretty high in their state.
Because of its two children with medical and special needs, our imaginary middle-class family has high medical bills. Under the Republican tax plan, they can no longer deduct those expenses. That used to be a huge tax savings for this cash-strapped family that would be eliminated. And about those student loans and the money our family owes to Care Credit for a dental procedure not covered by their insurance. Under Trump’s amazing tax cut plan, families with medical or student loan debt can’t deduct those expenses from their taxes. Nor can these teachers deduct the $250 of their own money they each spend on supplies for their cash-strapped classrooms.
The murkiest part of the evolving Trump tax cut is what happens to our family’s taxes as a result of having five kids, just like the Donalds senior and junior. There is debate among Republicans about the child tax credit. Although there are numbers bounced around that would raise the child tax credit, if it is not raised substantially it ends up being a tax increase for our imaginary family due to inflation. And the GOP tax plans being discussed would eliminate the personal exemptions that families with lower incomes rely on. Don’t ask me to explain this one. From what I’ve read, many American families will be hurt by this.
While the current Republican proposals might give a small boost to the economy, that would be short-lived. The addition of $1.5 trillion to the deficit would eventually create bad economic conditions and cause the economy to falter. To deal with the deficit, Republicans will probably argue for deep cuts to Medicaid, Medicare, and Social Security. Again, a disaster in the making for most middle-class Americans.
On top of this, there is the possibility that one of the parents in our imaginary family could become unemployed. Remember, they are teachers. According to the National Education Association, the tax reform bill would make it harder for states and local communities to adequately fund public schools. The NEA projects that $250 billion would be cut from public education funding, putting 250,000 education jobs put at risk. The quality of education for those five children, who attend their local public schools, would also decline.
If all of this isn’t depressing enough for our middle-class family, this just in…Now Senate Republicans will include a repeal of Obamacare's individual mandate in their tax reform plan. Starting in 2019, the mandate in the Affordable Care Act requiring folks to have health insurance, or pay a fine if they choose remain uninsured, would vanish. Trump is all over this idea. Health care industry groups, representing doctors (the American Medical Association and the American Academy of Family Physicians), hospitals (the American Hospital Association and the Federation of American Hospitals), and insurers (America's Health Insurance Plans and the Blue Cross Blue Shield Association), wrote to lawmakers on Tuesday opposing this change. No doubt, this would destabilize the market place and make insurance rates go up for our already struggling family.
So who wins with these proposed “tax cuts”? Families like Donald Trump, Jr.’s of course. The wealthy folks like him benefit the most from getting rid of the estate tax (won’t have to pay taxes when he inherits daddy’s billions), repealing the Alternative Minimum Tax, and limiting the tax rate on income earned by hedge funds, private law firms, and the Trump Organization. The bill also slashes the corporate tax rate from 35% to 20%, another huge savings for junior. If you think there is wealth inequality now, just wait to see what happens if this tax reform passes in its current form.
I tried my best to understand all of this, but my aversion to all things related to numbers and taxes made it particularly hard. If you want to check it out for yourself, I read articles in Forbes, Fortune, and the Washington Post that were helpful. The rest of my information came from a variety of reputable sources, but there are so many confusing things out there and the proposed plan keeps changing. Do your own research but make sure you are not reading fake news.
When it comes to supposed tax reform that mostly benefits the wealthiest Americans, I am reminded of what Paul Wellstone, the late Senator from Minnesota, said:
“We all do better when we all do better.”