Sarasota Rep. Vern Buchanan to vote this week
on second round of tax cuts for the wealthy
The House Ways and Means Committee, of which Rep. Vern Buchanan (R-FL) is a member, is planning to vote this Thursday on three bills that comprise a second round of tax cuts which, like the first round, is heavily weighted toward the wealthy and businesses, will lead to deeper cuts in services such as Medicare, Medicaid, Social Security and education, and will add nearly $3 trillion to the national debt. House Speaker Paul Ryan has said he plans to bring the legislation to the floor of the House the last week of September.
The primary legislation under consideration on Thursday would permanently extend the 2017 tax law’s provisions affecting individuals and pass-through businesses that are slated to expire after 2025 (these are summarized at the end of this memo).
Given that there is no evidence that the first round of tax cuts has lived up to its many promises to help working families and small businesses, we believe there is simply no justification for more huge tax breaks that mostly benefit the wealthy. We urge you to write an article or opinion piece concerning this latest misguided tax cut effort and consider these facts:
- This bill will cost $2.8 trillion over 10 years—2026 to 2035, according to Joint Committee on Taxation data analyzed by the Center on Budget and Policy Priorities. (The cost is $630 billion over the first three years.) This is 50% more than the $1.9 trillion cost over 10 years of the first Trump-GOP tax cuts, according to the Congressional Budget Office.
- It provides a tax cut of over $40,000 on average for the richest 1% (those with incomes above $836,000 in 2018), according to the Tax Policy Center. The bottom 40% (those with incomes below $55,000) would get an average tax cut of just $285—less than $1 a day.
- The richest one-fifth would get 65% of the tax cuts, the middle fifth would get 10%, and the poorest fifth would get 2%, according to the Institute on Taxation and Economic Policy.
- The first round of tax cuts has not proven successful in improving or strengthening the economy for the middle-class or lived up to its promises.
- Working families are still waiting for their $4,000 raise that President Trump promised corporations would give employees due to their steep tax cuts. Under the Trump tax law, the corporate tax rate was slashed from 35% to 21%, and the effective tax rate on offshore profits is half of that, giving corporations even more incentives to shift jobs and production offshore than they had before.
- Just 4% of workers have received a one-time bonus or pay raise from the tax cuts, according to a comprehensive database maintained by Americans for Tax Fairness.
- Last year’s tax cuts have not improved wages. Real (inflation adjusted) wages decreased by 0.2% for all employees from July 2017 to July 2018.
- Meanwhile, corporations are mostly using their tax cuts for stock buybacks, which are expected to reach $1 trillion this year alone and largely benefit wealthy shareholders and CEOs. Since the tax law passed, corporations have announced 100 times more in stock buybacks than they are giving in worker bonuses or raises connected to the tax cuts—$712 billion in buybacks vs. $7 billion in wage hikes.
- Corporate profits are at record levels while tax revenue to the U.S. Treasury has plummeted. Between the last quarter of 2017 and the first quarter of this year, after-tax profits were up 8.2% from $1.8 trillion to $2 trillion. Annualized federal corporate tax revenues to the Treasury were down 44%, from $264 billion to $149 billion.
- The new tax cuts for the wealthy and big corporations will deepen the deficit even more, giving Republicans additional excuses to demand even deeper cuts in Medicare, Medicaid, education and more. Shortly after their first round of tax cuts were signed into law, the House Republican budget proposed slashing $5 trillion, including from:
- Medicare ($537 billion)
- Medicaid and the Affordable Care Act ($1.5 trillion)
- Food for families ($157 billion from SNAP)
- Veterans benefits ($59 billion)
- Transportation and infrastructure ($317 billion)
KEY FEATURES OF THE NEW TAX BILL
The legislation would make permanent individual provisions of the Trump-GOP tax law that expire in 2025:
- Cuts in personal income tax rates
- Increases in the standard deductions, and the elimination of the personal exemption
- 20% deduction for pass-through business income, which mostly benefits the richest 1%; owners of pass-through businesses pay taxes as individuals not as corporations
- Doubling the value of estates and gifts exempted from tax (from $11 to $22 million a couple)
- Increasing the amount of income exempt from the Alternative Minimum Tax; the AMT ensures that wealthier taxpayers pay more in taxes than they would due to loopholes
- Expansions of the child tax credit
- Cap on the State and Local Tax (SALT) deduction and limitation to the mortgage interest deduction, which are tax increases
WHAT OTHERS ARE SAYING
Washington Post: House GOP is pushing a new round of tax cuts that could cost $2 trillion over 10 years, 9/11/2018
Center on Budget and Policy Priorities: New House Republican Tax Proposal Fails Fiscal Responsibility Test, While Favoring the Wealthiest, 9/11/2018
Committee for a Responsible Federal Budget, Further Tax Cuts are the Height of Fiscal Irresponsibility, 9/11/2018
Institute on Taxation and Economic Policy: Latest GOP Tax Package is Also Skewed Toward the Rich, 9/10/2018
Reason: GOP’s ‘Tax Reform 2.0’ Will Make it Harder to Balance the Budget, 9/11/2018
Tax Vox: Extending The TCJA Would Cut Revenue By $3.8 Trillion Through 2038, Mostly Benefit The Well-Off, 9/12/2018