House Republicans are on the defensive after a new analysis, the latest in a string, shows some middle-income people would see tax increases under their plan to rewrite the tax code.
While most taxpayers — 61 percent — would see their taxes fall in the next two years, almost one-fifth would pay higher taxes by 2027, the Joint Committee on Taxation said Tuesday.
Forty-six percent that year would get a tax cut while more than one-third would see only minimal changes in their tax bills, totaling less than $100.
It promises to be an explosive issue, especially given President Donald Trump and other Republicans’ promises to make the middle class the focus of their tax plans.
The JCT analysis is the second the agency has issued showing some modest-income people at risk of tax increases. The Tax Policy Center and other tax experts have come to similar conclusions.
That has some Republicans in the Senate pushing for significant changes, such as an even larger — and pricier — expansion of the child tax credit, a popular middle-income break, than the one House Republicans are contemplating.
It would require major revisions to the House plan. Some conservatives want to finance expanded middle class breaks at least in part by repealing the Affordable Care Act’s mandate to buy health insurance.
“The House and Senate — I think we need to do even more to provide a tax cut, not just tax reform, but a tax cut for every American,” said Sen. Ted Cruz (R-Texas).
Democratic critics of the plan are seizing on the findings while moderate Democrats who Republicans want to work with are expressing caution.
“I have some concerns,” said Sen. Joe Manchin (D-W.Va.), who was among several Democrats from states Trump won who met with administration officials on Tuesday. “The bottom line is the president told me specifically that this is not a tax cut for the rich — it’s a tax cut for the hard-working middle class, so I’m looking at everything we’re seeing.”
Trump called into the meeting from his trip to Asia. “We’ve made it clear that we think this bill tilts for the rich,” said Sen. Sherrod Brown (D-Ohio), who also attended. “ … We made it clear that we don’t agree with that.”
House tax writers emphasize that people in every income group would see their tax bills fall under the plan, estimating the average family would receive a $1,182 tax cut.
“You have to remember that half the country is living paycheck to paycheck,” said House Speaker Paul Ryan. “One thousand, one-hundred and eighty-two dollars for that average family — that goes a long ways to bring them relief and bring them piece of mind.”
The JCT said that only 8 percent of taxpayers would pay more in 2019 under the plan.
What’s more, Republicans said the legislation will be massaged as it makes its way through Congress.
“There’s definitely going to be changes,” said Rep. Vern Buchanan (R-Fla.), who sits on the House’s tax-writing committee. “We’ve got somewhat of a final product, but it’s quite awhile before we have a final, final product.”
“It’s a nine-inning game — we’re in the third,” he said.
The debate comes as the Ways and Means committee considers the legislation this week, with lawmakers there aiming to put it to a vote by the full House by Thanksgiving. Senate Republicans are slated to unveil their own tax-overhaul plan later this week.
Part of the reason some could see their taxes climb is House Republicans want to replace personal exemptions, which adjust tax burdens for family size, with new family credits. Those credits include an increase in a child tax credit to $1,600 per child, from the current $1,000, as well as new $300 credits for non-child dependents and a “family flexibility” credit. But those provisions would not be big enough to make up the difference for many families, and the new credits would expire after five years.
Republicans also want to dump a number of tax breaks used by middle-income people, including deductions for interest on student loans, large medical bills, state and local taxes and casualty losses.
They also want to index provisions of the tax code for a slower measure of inflation, which means people would be pushed into higher tax brackets over time as wages climb.
Though their plan is a net $1.5 trillion tax cut, Republicans are simultaneously both raising and lowering taxes. They are cutting taxes by more than $5.5 trillion, according to the Joint Committee on Taxation, while raising taxes by more than $3.8 trillion.
The report found widely varying outcomes within individual income groups. By 2027, for example, about 23 percent of those earning between $50,000 and $75,000 would see a tax increase. At the same time, 42 percent of people in that same group would see a tax cut of at least $500.
Among those earning more than $1 million that year, the report said, two-thirds would see a tax cut of more than $500 while one-third would see a tax increase of at least $500.
House Republicans, who made the family credits temporary in order to stay within their budget, say they expect lawmakers in the future to extend them to head off tax increases on the middle class.
“If we had the ability to design this without the bureaucratic inside-D.C. rules, maybe we’d have a different situation, but that’s what we’re looking at,” said Rep. Tom Reed (R-N.Y.) who sits on the tax-writing panel. “Five years from now, the folks who are going to be here, I’m sure, will do the right thing.”
But some Republicans, including Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah), are pushing for even larger child tax credits now. “Providing significant tax relief to working families shouldn’t be a final box to check after all of the lobbyists have had their fill,” Rubio wrote in a New York Times op-ed Sunday.
Cruz argues lawmakers ought to repeal Obamacare’s individual mandate — which the Congressional Budget Office says would generate more than $400 billion — to help pay for broader tax cuts.
Rescinding the mandate would raise money because, while it would mean the government would collect fewer fines from people who don’t have health insurance, that would be more than offset by the savings that would come from fewer people signing up for federally subsidized coverage, CBO says.
“This draft does a good job on the corporate and business side,” said Cruz. “We need to do every bit as good of job on the individual side” so that “every American, every family, every individual sees a real tax cut.”
Elana Schor contributed to this report.
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