There’s no shortage of appalling features in the reward-the-rich Republican tax bills passed by Congress. The process now moves to a phase where differences between each body’s bills must be reconciled. Those discrepancies offer slim chances for fair-minded Americans to pressure Congress to soften the blows. Even though a positive outcome is remote, that doesn’t mean it’s not worth the effort to help control health care costs, help college and university students avoid debt, help residents from high-local-tax coastal states lower their tax bills, and stop the oil-and-gas industry from derailing solar and wind energy. It’s also worth pressuring Congress to back off of cuts to safety nets like Medicare, which would be triggered by the future revenue losses the GOP’s 2017 tax bill will likely yield.
What follows are 10 areas, starting with health care, where the House and Senate bills differ and where the public can weigh in.
1. Obamacare Mandate Repeal. The Senate bill repeals the Affordable Care Act requirement that every adult has to have health care coverage. “The Congressional Budget Office says 13 million more Americans would be uninsured by 2027, leading America’s uninsured rate to increase from 11 percent to about 16 percent. The change is projected to save $338 billion over 10 years,” the Washington Post reported, citing figures from congressional tax analysts, who said the exodus of people now carrying insurance would cause premiums to rise by an estimated 10 percent a year into the foreseeable future. The House bill does not include the Obamacare coverage mandate, but the Post has noted that Speaker Paul Ryan backs its repeal.
2. Medical Expense Deduction. The House version repeals medical expense deductions, if the annual expenses are greater than 10 percent of one’s annual income. The Senate bill didn’t just leave it in there, but Sen. Susan Collins, R-ME, passed an amendment lowering it to 7.5 percent, which will help families with chronic conditions. This deduction is very important to people facing chronic conditions or living on fixed incomes, like seniors and retirees.
3. No Automatic Medicare Cuts. As Social Security Works’ Nancy Altman and Linda Benesch have written, “The tax scam, now headed to a conference committee, will trigger automatic cuts to Medicare, once Donald Trump signs it into law. According to the Congressional Budget Office, it will automatically cut Medicare by $25 billion in the next year and $400 billion in the next decade. Last time Medicare faced an across-the-board benefit cut due to the 2013 budget sequester, it literally killed. Among other horrors, it led to elderly cancer patients being denied chemotherapy treatment. Congress could waive the automatic cuts, but it would require Speaker Paul Ryan, who has said he has been dreaming of these kinds of cuts since his college days, to bring a waiver bill to the floor and convince his caucus to vote for it.”
Altman reiterated the threats to health care and safety nets in an email Monday:
“The repeal of a key element of the Affordable Care Act and the elimination of the deductability of medical expenses are a major assault on people’s ability to afford the health care they need. We are fighting hard against those elements in the GOP tax giveaway-to-the-rich, but dropping those elements is not enough. Those of us who want to protect Social Security and Medicare must fight to defeat the tax bill… Prior to enacting the tax bill, Republicans could—and should—enact legislation protecting Medicare from those automatic cuts. Indeed, a waiver of the automatic Medicare cuts could and should be a provision in the continuing resolution to be enacted in the next few days to avoid a government shutdown.”
4. Teachers Buying School Supplies. The House bill eliminates a $250 tax deduction for teachers who spend their own money on classroom supplies. The provision has angered many teachers, the Post noted, who spend an average of $500 annually on essential supplies for their classrooms, according to one survey. The Senate bill saves the deduction and doubles it to $500. It is unclear what will happen to the provision as the bills move to reconciliation.
5. Student Loans and Tuition Waivers. The House legislation is a disaster for students. It repeals the tax deduction for student loan interest, which allows people repaying those loans to cut their taxes by up to $2,500 annually, the Post noted. It also taxes tuition waivers, which allow many graduate students to attend school for free. But the Senate bill doesn’t change current law, setting up a high-stakes showdown for younger people.
6. Opening the Arctic Refuge to Oil and Gas. The Senate bill opens a 1.5 million acre tract of the Arctic National Wildlife Refuge (ANWR) to oil and gas exploration, but the House bill does not. This tract is near-shore marshes and grassland foothills in the uppermost northeastern corner of Alaska bordering on the Arctic Ocean. For decades, the energy industry and environmentalists have fought over oil exploration in the Refuge, and the Senate, in an apparent effort to win support from Alaskan senators, added the drilling.
7. Undermining Alternative Energy. Another pro-oil-and-gas provision in the Senate bill slams the solar and wind power industry, according to the Los Angeles Times, treating investment tax credits for solar and wind as income and taxing them. Legislation passed in 2015 gave these industries a 30 percent tax credit. The American Council on Renewable Energy said this provision, if passed into law, could stop investment in the sector. A third pro-oil-and-gas provision in the Senate bill would end a $7,500 tax credit for electric vehicles, another slap against alternative energy and climate change activism.
8. Deducting State and Local Taxes. For residents of high-local-tax coastal states, the push to end the federal deduction for state and local taxes will amount to a large overall tax increase for many residents. The House bill entirely eliminates the deduction for state and local taxes, despite protests from some House Republicans from New York, New Jersey and California. But “the Senate bill adopts a House compromise that would allow individuals to deduct up to $10,000 in property taxes only,” the Post noted. “But some House Republicans, including ones from California and New York, have continued to push for some deductibility for state income taxes, and GOP aides said that could become an issue in the conference.”
9. Alternative Minimum Tax. Many of the differences in the House and Senate bills concern issues affecting the wealthy, such as the treatment of estate taxes. But one provision that also affects the very rich and has a bearing on revenues supporting other public programs is the Alternative Minimum Tax. As the Post reported, “the Senate passed its final legislation early Saturday morning, when the Senate changed its bill to preserve a provision of the current tax code that sets an alternative minimum tax floor for very wealthy individuals. That provision would be eliminated in the House bill, and scrapping the alternative minimum tax has long been a priority for GOP tax writers.” Preserving the AMT will be key to higher federal revenues that would not trigger other cuts to safety nets like Medicare.
10. Pass-Through Corporations. There are millions of these firms in the country, ranging from small businesses to large real estate companies (like Trump’s) and sports teams. These corporations are owned by a person or a partnership, and their income is passed through to the owners, who then pay taxes based on individual rates.
“The new pass-through rules is the single biggest innovation in this bill, creating a new category of preferentially taxed income (beyond capital gains, for example),” Richard Kaplan, a University of Illinois law school tax expert, said in an email. “The tricky part will be monitoring how this category gets defined and whether some small business types try to push the envelope and get the better tax rate on what would otherwise be considered their wages. Many small businesses are not low-income folks, and the Senate’s 23% deduction will certainly lower their tax expenses. That may please them, but adding a new classification of income can never be called ‘simplification,’ if that matters to anyone.”
According to economist Dean Baker, a co-director of the Center for Economic Policy Research in Washington, D.C., both the House and Senate bills are positioning pass-through corporations as the next major loophole and should be fought.
“The special treatment of pass-through income is a big thing to fight,” Baker replied in an email commenting on this list. “Getting a 23 percent across-the-board cut was actually worse than the benefit that just went to the top brackets by reducing the max rate to 25 percent. There is no justification for having people pay a lower tax rate just because they get their income from a pass-through corporation. They already got a huge benefit from having the privilege of corporate status without having to pay the corporate income tax. Now we say that they get a special lower tax rate for their income as well?”
“This is a recipe for massive tax avoidance through the pass-through corporation creation business,” he said. “Why shouldn’t everyone figure out ways to get their income through a pass-through? Certainly higher end professionals like doctors and lawyers would.”
The Conference Committee Process
Congressional Republicans and the White House want their tax plan signed into law before Christmas. That leaves a short window for fair-minded Americans to urge their congressional delegations to take some steps to soften legislation that unapologetically transfers money to the richest Americans.
The public may not be able to stop the Republicans, but voters can raise their voices in defense of health care, higher education, alternative energy, and tax fairness. The GOP may ignore them—but the November 2018 elections are not so far in the future.