Republican tax writers’ still-evolving plan to cut taxes for corporations and the wealthy threatens to do so on the backs of middle-income Americans in more ways than one.
Republican leaders’ evolving plan to cut federal taxes for corporations and the wealthy threatens to do so on the backs of middle-income Americans in more ways than one.
A version of the plan released Thursday would scale back the state and local tax deduction, which helps hundreds of thousands of Washingtonians save on their tax bills. The plan championed by Republican Rep. Kevin Brady of Texas, the top House tax writer, would also eliminate the tax break for people paying interest on student loans, while throwing out a deduction for people drowning in medical expenses.
Together, these measures would deliver a one-two punch to the gut for middle-class taxpayers, along with a cynical statement about Congress’ priorities. While billed by House Speaker Paul Ryan as a boon for average taxpayers, the tax-reform proposal taking shape would trample many middle-class families in a rush to help hedge-fund managers and corporate interests.
Consider the plan to reduce the state and local tax deduction. In Washington state — which has no income tax — residents would no longer be able to deduct what they pay in sales taxes from their federal taxable income, leaving them with less money in their pockets. About 825,000 Washingtonians benefited from the sales-tax deduction in 2016, claiming an average deduction of roughly $2,600.
Limiting the mortgage-interest deduction would also hit many homebuyers in Seattle and the Puget Sound, where real estate prices are sky high and still climbing. Under the new GOP plan, homeowners could deduct only the interest paid on the first $500,000 of a new mortgage, instead of the current $1 million cap. Meanwhile, the median house now sells for $725,000 in Seattle and $855,000 on the Eastside. More than 11,000 King County homebuyers took out a mortgage exceeding $500,000 this year.
Backers of Brady’s plan say it is a win for workers and the middle class, partly because it would nearly double the standard tax deduction and includes a modest increase in the child-tax credit. But they rarely mention how a companion push to get rid of the personal exemption for each household member could still put families with multiple children further behind.
GOP leaders would be hard-pressed to justify cutting the corporate tax rate from 35 percent to 20 percent, then telling millions of middle-class workers and homeowners they need to swallow higher taxes to foot the bill — all while adding $1.5 trillion to the national debt. Many economists and critics say there’s no evidence that cutting the corporate tax rate by itself will boost wages and spur economic growth, as President Donald Trump has promised. The secrecy of the fast-paced negotiations has made it even more difficult to determine who wins and who loses.
Brady and other Republican tax writers need to reconsider this approach, and soon. If they don’t, voters should show them who they really work for when midterm elections roll around in 2018.