Scott MacKay Commentary: Republican Federal Tax Overhaul Skewed To Wealthy

Nov 10, 2017

Republicans in Congress and the Trump Administration are working on a federal tax overhaul they say will help the middle class. RIPR’s Scott MacKay says that so far the proposals aren’t going to do much for middle-income earners, particularly those of us living in the blue states of the northeast.

Republicans are fond of labeling their plans to change the tax system as a “reform” that would help small businesses and corporations, taxing them less and putting more money into creating jobs. But a peer beneath the veneer of the latest version of this proposal shows that it is still skewed to the wealthy.

Perhaps this proposal ought to be called by some different names, such as the "Slam the Blue State Middle Class Tax Overhaul," "Explode the Deficit Plan" or "Enshrine the Rich Families."  

Federal tax changes are never easy. Which is why there has been no comprehensive overhaul since the Reagan Administration in the 1980s. The tax code is riddled with special interest loopholes that favor some industries and taxpayers. And harm others.

If you live in the suburbs of Massachusetts or Rhode Island, particularly where housing costs are high, you are likely to get hit in the wallet by the latest GOP plan. This is because the Republicans aim to remove the state and local tax deduction and limit deductions for mortgage interest on homes costing more than $500,000.

There are also proposals to cut deductions for medical expenses. And to hit the money socked away in the wealthy endowments of private colleges, of which New England has more than other regions.  

The Congressional Budget Office, the non-partisan financial arm of Congress, has estimated that the projected plan would raise the deficit by $1.7 trillion over the next decade. This amounts to a huge generational burden on the young, who are just beginning their careers and starting families. Do baby-boomers really need lower taxes at the expense of their grandchildren?

Perhaps the most egregious sop to the wealthy is the phase-out of the estate tax. No less an entrepreneur than Andrew Carnegie called this the wisest and fairest tax. You currently don’t pay anything unless you are doing very well. No couple, for example, with an estate of less than about $11 million pays this levy.

Wealthy folks ought to be able to give their children enough so they can do anything, but not so much that they can do nothing. In an era of rampant income inequality, why are we making rich dynastic families richer? With the exception of the Republican donor class, where is the impetus for repealing estate taxes?

Bloating the deficit will jeopardize the government benefits millions of Americans rely on, such as Medicare and Social Security. Conservatives love to point at social spending as the culprit for budget red ink. Yet a recent Brown University study noted that federal spending on post-911 wars will reach $5.6 trillion by the end of next year.

What these plans look like is an attempt to foist the red-state Republican vision of America on states that have higher taxes and support public schools and infrastructure. It favors corporations and red states that derive wealth from extractive industries, particularly petrochemicals, over states whose high-earners thrive in medical, educational and professional services.

This is a fine plan for climate change deniers. But if you were serious about addressing human-made climate mischief, why not establish a carbon tax on polluting industries? Then use the proceeds to trim the middle-class tax burden.

It’s as if the Republicans want to make every state Texas, which has oil in the ground, low taxes, mediocre public schools and a large number of children without health insurance.

Slashing corporate taxes to make American companies more competitive in world markets sounds great. The problem is that many of them don’t pay their fair share now, due to loopholes not available to most workers.  This GOP House plan favors the investor class over the working class, especially by preserving the carried interest deduction so loved by hedge fund gurus. And too many U.S.-based companies park money in off-shore tax havens. If companies want lower tax rates, wouldn’t a fair trade-off be ending their ability to take advantage of sketchy foreign laws?

Starving the government plays to the Tea Party and Libertarian Republican base. It doesn’t help most of us. As Oliver Wendell Holmes said, “Taxes are the price we pay for civilization.”

Scott MacKay’s commentary can be heard every Monday on Morning Edition at 6:45 and 8:45 and on All Things Considered at 5:44. You can also follow his political reporting and analysis at our “On Politics” blog at RIPR.org