Republicans released an outline of their tax plan on Wednesday, and it appears to be in direct conflict with what President Donald Trump promised on the campaign trail: that he would protect middle-class Americans before considering breaks for others. Trump doubled down on that pledge as recently as two weeks ago, saying wealthy people would not benefit from his plan. But an analysis by Chuck Marr with the Center on Budget and Policy Priorities shows that this plan is hardly the ‘Middle Class Miracle’ the president touted yesterday.
The top 1 percent of households (those with incomes above $700,000) would get roughly 50 percent of the framework’s net tax cuts, or roughly $150,000 a year on average. The top 0.1 percent of households (those with incomes above $3.8 million) would get roughly 30 percent of the framework’s net tax cuts, or about $800,000 a year, on average. A married couple with one child claiming the standard deduction would get no tax cut if they earn $24,850 or below. A married couple with one child earning $48,700 (the median income in 2015 for a working-class family of that size and claiming the standard deduction would get a net tax cut of just $180.
The plan proposes doubling the standard deduction for personal income taxes – a move that its authors say is a major tax break for the middle class. But as the Business Insider’s Josh Barro explains that doesn’t quite add up:
Here’s how that math works. Let’s say you are single with no dependents, and you have a moderate income. Currently, you get to take the standard deduction ($6,350) and one personal exemption ($4,050). If you are 65 or older, you also get to take an additional standard deduction ($1,250). That adds up to $10,400, or $11,650 if you’re over 65. The Republican plan would replace all these provisions with a single deduction of $12,000 ($24,000 for married couples.) That’s a 15% increase — except for seniors, who get a 3% increase. And then your first dollar of taxable income would be subjected to a 12% tax rate, instead of the current 10%. But don’t worry — the framework says “additional tax relief,” as yet unspecified, will emerge for you during the committee process.
Governor looks to build consensus
Gov. John Bel Edwards said he is ‘almost agnostic’ on how the state should stabilize its budget, adding that he would support any mix of ideas for a tax overhaul from the non partisan Task Force on Structural Changes in Budget and Tax Policy. The AP’s Melinda Deslatte reports on the governor’s new strategy to build an elusive consensus around taxes and budgeting:
To fill the shortfall and replace the expiring taxes, the Democratic governor told a Baton Rouge luncheon crowd that he’d support any mix of ideas for a tax overhaul recommended by the nonpartisan study group created last year by lawmakers. The group offered a long list of proposals to rewrite sales, business and personal income tax laws. … He added, however, that a good place to begin would be to lessen the billions of dollars in tax breaks that Louisiana has on the books. Those ideas went nowhere last year in the Louisiana Legislature. Still, Edwards said he’s optimistic about reaching a compromise with lawmakers about a tax package to close the budget hole for the 2018-19 financial year that begins July 1. To make the full $1 billion-plus in cuts instead, he said, would be “catastrophic.”
Ending DACA a bad economic decision
President Donald Trump’s administration has repeatedly peddled misinformation about the Deferred Action for Childhood Arrivals (DACA, or “Dreamers), including the myth that Dreamers take away benefits and jobs from American citizens. The truth: Dreamers are not eligible for health insurance marketplace subsidies, Medicaid, SNAP benefits or cash assistance and are giving a much-needed boost to Social Security ($19.9 billion over the next decade). As Chad Stone with the Center on Budget and Policy Priorities explains, Dreamers have a positive economic impact since they are both workers and consumers.
In fact, the main reason why immigration has a positive effect on economic growth is that immigrants are both workers and consumers. A larger working-age population means the economy can produce more goods and services and support a higher level of aggregate demand for those goods and services. Moreover, DACA participants are likely to be among the higher-skilled group of immigrants whom the National Academy report finds may raise the wages of both higher- and lower-skilled native-born workers…Estimates from the Cato Institute and the Center for American Progress indicate that eliminating DACA could cost the economy several hundred billion dollars of gross domestic product (GDP) over the next decade. Less GDP means less government tax revenue, and any offsetting reductions in spending on DACA participants would likely be much smaller than the revenue loss.
Partisan politics threatens kids’ health care
As LBP’s Jeanie Donovan previously reported, the Children’s Health Insurance Program has been a godsend to uninsured children in Louisiana and throughout the country, and there was optimism that its reauthorization would move smoothly through Congress after key senators struck a bipartisan deal. But the effort to extend CHIP was halted when Senate leadership, in a last ditch effort, decided to try to repeal the Affordable Care Act via the ultra partisan Cassidy-Graham bill. Congress has a tight timeline to extend a program that provides health insurance to 9 million children. Vox’s Dylan Scott explains that partisan politics still could interfere with CHIP’s reauthorization:
CHIP advocates have also been nervous that the program could become a battleground for the still-simmering Obamacare fight — that the program’s funding could get stuck not because of any disagreements over CHIP itself, but because it becomes the cipher for a separate health care fight. There were reports earlier this month that Republicans wanted to tuck some Obamacare repeal provisions into the program’s funding extension. “CHIP is not and never has been a vehicle to drag controversial provisions across,” [the March of Dimes’ Cindy] Pellegrini said earlier this month. That might also explain why Senate leadership has been reluctant to set any firm timetable for taking up the CHIP extension. Hatch has said he doesn’t want to see unrelated measures attached to the bill, but once the bill gets on the Senate floor, unexpected things can happen. “If they put it on the Senate floor, how do they prevent amendments to it or prevent people from pursuing agendas?” [First Focus’ Bruce] Lesley said. “That’s what keeps leadership from even wanting to put it on the floor.”
Number of the Day
120,443 – Number of children in Louisiana who receive health insurance through CHIP. (Source: Louisiana Department of Health)