I wholeheartedly support the stated goals of tax reform: simplifying the tax code, supporting small businesses and putting money back in the pockets of middle class families. I was optimistic that it might present an opportunity for bipartisan accomplishment.
My perspective on this issue is shaped in no small part by my experience as a job creator. As someone who has owned and managed businesses both large and small, I know that the best way to grow the economy and create good jobs is through increasing demand. And the best way to increase demand is to afford more resources to middle-class families. It seemed that the politicians in Congress agreed.
We finally got some details about their plan last week when Rep. Erik Paulsen and House Speaker Paul Ryan released their framework, however, and it was immediately met with opposition from all sides.
Some of that opposition was to be expected, and it was immediate and overwhelming. In fact, I may be the only Democrat running for Congress who didn’t swiftly and fully denounce it, choosing instead to take the time to study its full impact on the district I hope to represent.
But some of that initial opposition also came from traditionally conservative allies: deficit hawks, the National Federation of Independent Business, the National Association of Home Builders and others.
In the past week I have listened to these concerns, I have investigated the details of the plan, I have spoken with many taxpayers in Minnesota’s 3rd District, and the more I learn the more troubled I am.
According to nonpartisan experts, the vast majority of the benefits of the Paulsen-Ryan tax plan will flow to the top 1 percent of income earners. Among Minnesota taxpayers, 39 percent of the benefits would go to the wealthiest 1 percent — compared to just 9 percent for those in the middle. The average tax cut for someone in that 1 percent is $40,780. For those in the middle, it’s just $470.
Taken together, those cuts represent about 20 percent of the overall cost of the bill. The remaining 80 percent of the cuts in the bill go to businesses, with the majority going to large corporations in the form of a reduction in the corporate tax rate. While we need a competitive tax climate in order for businesses to thrive, I believe tax reform should primarily benefit middle class taxpayers.
Unfortunately, this bill in its current form fails to meet that objective.
The Paulsen-Ryan plan would also disproportionately harm many middle class taxpayers in Minnesota’s 3rd Congressional District. Many middle-income earners would be moved into higher tax brackets.
Others in our district who rely on the relief provided by the mortgage interest deduction and student loan interest deduction to make ends meet would see both ended — along with the medical expense deduction and even a deduction for teachers who buy supplies for their classes. Factoring these changes, one recent study showed that up to 25 percent of all taxpayers would actually pay more in taxes under this plan.
The Paulsen-Ryan plan also would cap or eliminate Minnesotans’ ability to deduct state and local taxes — the so-called SALT deduction. A third of all filers in our state – and nearly half in the 3rd District — use these deductions to help lower their tax bills. In our district, the average deduction is over $17,500.
Here’s one more number to consider: $1.5 trillion. That’s the amount the Paulsen-Ryan plan adds to the deficit. They argue that the trickle-down effect of their plan will create booming growth that will offset that cost. Here again, however, experts disagree.
Fitch Ratings has said that these tax cuts “will not pay for themselves or lead to a permanently higher growth rate” and instead would add “significantly” to the national debt.
So much for fiscal responsibility.
There is a better way forward. We need to afford real and lasting relief to middle class families — not to people like me who frankly don’t need it. We should pair a reduction in the corporate tax rate with the closure of those loopholes that allow corporations to avoid paying any taxes at all. And let’s do it in a revenue-neutral way so that we’re not exploding the deficit and burdening our kids with even more debt.
I will support a bill that accomplishes those objectives. Unfortunately, the bill now moving through the Senate doesn’t appear to be much better, which means it will take new ideas — and a new representative in the 3rd District — to get it done.
By Dean Phillips
Click here to read the original post.