It redistributes from working people and the middle class to the rich. And that’s just wrong.

Marc Stier |

With all the controversy over the details of the tax cut bill that is moving towards a final vote in the House and Senate this week it is easy to forget about the basic features of the bill.

As they did during the debate over repeal of the Affordable Care Act, the Republicans put forward noxious proposals—to radically reduce the state and local tax deduction, to tax graduate student stipends, to eliminate the deduction for teachers who use their own funds in classrooms, and to eliminate the deduction for extremely high medical expenses among others—and then removed them from the final proposal.

But we shouldn’t be gratified that these horrible elements of the bill are gone when the basic framework of the bill, which has remained constant in every version considered by the House and Senate, remains so awful.

The legislation is basically a huge and permanent tax cut for the largest and wealthiest corporations and pass-through businesses that will benefit the 1% of United States families who own them combined with a temporary tax cut for individuals. The overall impact in Pennsylvania in 2019 can be seen in this first table, which shows that the bottom 60% of Pennsylvanians with an average income of $34,100 will get an average tax break of $400. On the other hand, the richest 1% of Pennsylvanians with an average income of $1.8 million will get an average tax cut of $53,580. And that huge difference is not just a matter of cutting taxes in proportion to who pays them. The bottom 60% will see their taxes decline by 1.2%. The top 1% will see their taxes decrease by $2.1%.

And, as the second table shows, by 2027 when the indiviidual tax cuts have expired but the corporate and business tax cuts remain in place. the basic outline of the bill remains—those at the very top benefit while most working and middle class people suffer. The bottom 60% will see their taxes actually go up by an average of $100 or .2% of their current tax bill. The top 1% will see their taxes go down by an average of $6,930 or .3% of their current taxes. (Republicans claim that they will extend the individual tax cuts. There is little reason to think they will do that. But if they do, the additional deficits created by the legislation will grow to more than $300 billion per year.)

There are other reasons to oppose the bill.

  • Upper middle-class taxpayers will pay more because of the limitation on state and local tax deductions.
  • Those same limitations on state and local tax deductions will make it more difficult for the state to close its budget and public investment deficits.
  • There is the impact on health insurance affordability and costs. About 500,000 fewer working-class and middle-class people in Pennsylvania will have health insurance; Nationally it will be 13 million. In 2019, people in their 50s and 60s who purchase health insurance in the individual market will pay more for insurance than they gain in tax cuts. By 2027 everyone who purchases health insurance in the individual market will pay more for insurance than they gain in tax cuts.
  • The tax bill allows drilling for oil and gas in the Artic National Wildlife Refuge (ANWR) which is deeply harmful to the environment.
  • Ultimately the huge deficits caused by the tax bill could, under certain economic conditions, undermine economic growth. And they will, sooner rather than later, lead the Republicans to try to put in place deep cuts to Social Security, Medicare, Medicaid, Food Stamps, and other important programs that reduce poverty and serve human needs.
  • The legislation will keep the parents of 1 million children from accessing the Child Tax Credit despite the small changes in the bill added to meet Senator Rubio’s demands.
  • And, of course, this tax cut is unnecessary. There is no reason to think it will encourage economic growth and job creation. Given that the fundamental barrier to economic growth is inadquate consumer demand, raising taxes for working people and the middle class, the people in this counry who actually spend most of what they earn, will undermine growth.

These other problems with the Republican tax cut plan are all really important. Any of them, by themselves, is reason to oppose this terrible legislation.

But the fundamental reason to oppose it—the one underlies all the others—is seen in the data we presented above.

This legislation is basically designed to redistribute income from working people and the middle class to the very rich. And that is, plain and simply, immoral and contrary to any public good we can imagine.

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