Members of the House of Representatives and the United States Senate have gone home for their Thanksgiving recess, having labored mightily to take care of their rich friends. They found the right present. Now they just need to wrap it up and put a nice bow on it.
So let us list the poor and needy who will receive these bounties.
Begin with Donald J. Trump. Trump’s family will someday benefit in a huge way from the elimination of the estate tax. His kids and grandkids know they are in for a bountiful reward years from now.
Things like changing thresholds for income tax rates plus the special tax saving opportunities that will only be available to developers and those who play in the world of multiple limited liability corporations will undoubtedly benefit the family Trump by additional millions. We can assume that this is so because it is one of the two main reasons for Trump hiding his tax returns, the other, of course, being his Russian connections.
Since Congress is loaded with millionaires, the things that will benefit Trump will also to a lesser degree benefit many members of Congress personally.
Corporations will benefit most of all, with a huge tax cut. Most corporate executives at a recent Wall Street Journal event admitted that the corporate tax cuts will hardly influence any of their business decisions. The money will mainly fall into the pockets of stockholders and CEO’s, which is what happened the last time there was such a tax cut.
Senator Ron Johnson of Wisconsin is objecting to the Senate version of the tax bills because it does more for big businesses than small businesses. Johnson owns a small business, so of course this issue interests him. Johnson also raised objections when the ACA “repeal and replace” bill was being drafted, but they tweaked the legislation and he folded, just like he will do on the tax bill.
If you live in New York, as most of this blog’s readers do, there is a two word message in the bill just for you: “drop dead.” Ignoring the fact that New York is a major tax-donor state to the rest of the country, the new legislation will either limit state and local tax deductions to $10,000 for property taxes only (the House bill supported by Chris Collins and Tom Reed would do that) or it will eliminate the deduction entirely, as in the Senate bill.
Collins and Reed will tell you that the increase in the standard deduction amounts will take care of that problem, but they conveniently ignore the fact that their bill would also eliminate personal deductions, which for a family with two or more children could pretty much wipe out whatever benefit that raising the standard deduction would produce.
In a momentary slip of the tongue, Collins admitted that he was supporting the tax bill because his political donors threatened to stop giving if he does not get tax legislation passed. His political spokesman’s lame excuse that the donors that Collins referred to are everyday folks in Collins’ congressional district was silly. Everyone knows what Collins meant.
It is commonly suggested that that the state and local tax deductions in New York State mostly benefit the folks in New York City and the surrounding suburban counties. There are, however, many folks in local communities such as Amherst, Clarence, Hamburg and Orchard Park who will be hurt by the Republican plans. I’m sure that there are also people who will lose out in a big way in places like Buffalo, Lancaster and West Seneca. Thanks Chris!
The Republicans, and only the Republicans since they have excluded Democrats from active participation in the bill drafting, are working overtime to tell us that their tax cuts are middle class tax cuts, but there is considerable evidence that the legislation will raise taxes for a good portion of the middle class. Things such as a small increase in the child care credit, pushed by Ivanka Trump, are just cheap window dressing.
As lawyers, accountants and economists pore over the details of the proposed tax legislation, there are more and more items popping up that will inflict multiple wounds to the poor and middle class. Here’s just a sampling:
- Teachers for many years have been able to deduct up to $250 per year for their personal purchase of classroom supplies that are often in short supply in cash-strapped schools. That deduction will vanish.
- Student loan interest will no longer be deductible, making it more difficult for college graduates to get started with their post-education lives.
- Graduate students who have things like teaching assistanceships will now find that the value of their waived tuition is now to be considered taxable income, making going to graduate or professional schools more expensive or out of reach for those who are not wealthy.
- The increase in the standard deduction will significantly impact charitable donations of all sorts as the tax incentive for donating diminishes when the standard deduction is raised.
- Tax exempt status for private activity bonds will vanish under one Republican proposal. Such bonds are used for airport, utility and similar construction, which will drive up the cost to local taxpayers.
- Another provision of the current tax law that benefits local taxpayers allows municipalities to re-finance previously issued bonds when interest rates drop. Local governments often save millions in the re-financings. Buffalo News reporter Jerry Zremski has done a great job outlining the consequences of this and other features of the tax legislation that will impact people in Western New York.
Republicans love to proclaim their efforts to bring down the accumulated federal deficit, but their hypocrisy is exposed in this legislation, which will drive up the total national deficit by at least $1.5 trillion over the next ten years. Breaks for individuals will expire to artificially stay within the $1.5 trillion cost cap, while breaks for corporations would be made permanent. Claims about how economic growth will take care of the deficit are right out of the fairy tale stories of the Reagan era.
Oh yeah, and the Republican Senate bill will eliminate the individual mandate requirement from the Affordable Care Act. They are selling this as a tax cut. In a way it is, since the tax penalty for someone who does not buy health insurance would be eliminated. But the consequences of that action would over a period of years leave millions of people without health insurance. Many of them will once again show up in hospital emergency rooms and receive services that the rest of us will pay for in some fashion through our insurance. Those who have coverage could also wind up with premium increases of ten percent or more per year as healthier people drop out of coverage and the people left in the medical plans require more services than others who decided to skip out.
So these are the things that the Republicans want you to be thankful for this year. We are so lucky. Happy Thanksgiving!