Editorial: Slap-dash tax reform goes all in for corporations

By The Herald Editorial Board

Doing away with “regular order” to rush virtually unseen and slapdash legislation through the U.S. House and Senate worked so well with Republican efforts to repeal and replace the Affordable Care Act.

Why wouldn’t they take the same path with tax reform?

Which is why, during three-and-a-half days of markup before the House Ways and Means Committee, the committee adopted all of three amendments, none of them from Democrats, and the last of which was a 63-page amendment that committee members were given 20 minutes to review before voting to send the GOP’s 429-page tax plan to the full House for a vote this week.

Compare that, says U.S. Rep. Suzan DelBene, Washington’s 1st District Democrat, to the process used to pass the last major reform of the tax code in 1986, during which 26 days of markup before Ways and Means — where committee members review, debate and offer amendments — followed a full 30 days of public hearings and expert testimony.

DelBene, of course, wasn’t there in 1986, but she was there last week, one of 20 minority members, seeking at the least a more deliberate consideration of what all agree is a major reform of the nation’s tax code. And it was DelBene who during questioning of the chief of staff for Congress’ Joint Committee on Taxation, laid out examples of how the tax plan offered by House Republicans benefits corporations over individual taxpayers.

Under the legislation, DelBene pointed out in her questioning that:

Teachers who buy pencils, paper and other supplies for their students will no longer be able to deduct those expenses from their taxes, while corporations that buy such supplies for their employees will be able to so; and

Individuals will no longer be able to deduct state and local taxes on their federal tax returns, while corporations can deduct the same taxes on businesses purchases.

Such protection of deductions for businesses are on top of a significant reduction in corporate tax rates to 20 percent from the current 35 percent.

To pay for that major shift in tax responsibility, the Republican tax plans — with some differences between the House version and the outline released last week by the Senate — eliminates deductions and credits that will amount to tax increases for low- and moderate-income American families.

In addition to losing the deduction for state and local taxes and teachers’ classroom supplies, individuals and families — under the House Republican plan — would lose the ability to deduct interest on student loans; catastrophic medical expenses; property and casualty losses, such as those from this year’s hurricanes and wildfires; the tax credit for electric vehicles and even a $20 monthly deduction for those who ride a bicycle to work, among others.

The one change Republicans made from the original proposal was to keep a one-time tax credit for children adopted out of foster care.

To make up the loss of those itemized deductions, the tax proposals double the standard deduction for individuals and couples and even add an additional $300 credit for families, but those provisions aren’t delivering on earlier promises by President Trump, House Speaker Paul Ryan and others that reform would mean a tax cut for “everybody.”

Ryan has since walked back his statement and told Fox News “the average taxpayer at all income levels gets a tax cut,” as reported in a Washington Post fact check last week.

But even “average” will leave a lot of families with higher taxes. The same Post article cited an analysis that shows that by 2027, after some provisions — such as that $300 credit for families — have expired, more than 40 percent of families with children will end up paying higher taxes than they do now.

And why allow even modest allowances for families and individuals to expire when corporation’s tax breaks are made permanent? Because Republicans have to avoid adding more than $1.5 trillion to the national debt over the next 10 years. As part of the budget agreement, that limit — which is what passes for fiscal conservatism now — was set to allow House and Senate to pass tax reform with a simple majority, avoiding the need for any buy-in from Democrats.

Republicans are adamant that the reduction in corporate tax rates is necessary to spur investment by businesses that will result in more employment. But that trickle-down theory was disproved in the laboratory of Kansas where, after growth lagged and deficits ballooned following major tax cuts, the Republican-led Legislature restored taxes to earlier levels, even overriding its governor’s veto.

Republicans, DelBene said by phone following the committee’s party-line vote, even rejected a “circuit-breaker” provision that would have tied corporate tax rates or other provisions to a certain level of growth that supporters have promised will be created by the tax cuts.

The House is expected to vote on the bill as early as this week, while the Senate begins committee consideration of its legislation, with the expectation that differences between the two versions will be worked out for final approval, then sent to the White House before Christmas.

DelBene said Democrats are open to considering tax reform, and even a reduction in corporate tax rates, but that would require a bipartisan process that would allow for more careful and deliberate consideration.

And doing it this way worked so well for Republicans the first time.