FPWA: Trump Tax Plan is Punishing for New York Families
The “Unified Framework” plan put forth by the White House and the congressional Republican leadership is scant on details for low- to middle-income taxpayers, but rich in specifics for the wealthy – including President Donald Trump himself.
Disguised as “tax reform”, the proposal, as it stands now, is a betrayal of the Trump Administration’s promise that their tax proposals would “help low- and middle-income families who have been left behind by this economy.”
Indeed, the Tax Policy Center found that households in the top 1 percent would receive 80 percent of the tax cuts over the next decade, and the most well-connected among them – the top one-tenth of 1 percent – would receive a $1 million handout.
Millionaires – who make up 0.6 percent of New York state’s population – would receive 73 percent of the tax cuts, equal to an average handout of $160,000, according to the Institute on Taxation and Economic Policy.
Meanwhile, a full third of Americans earning between $55,000 and $150,000 a year would see a tax increase when the plan is fully phased in, according to TPC’s analysis.
Several specifics of the tax reform proposal tilt heavily in favor of high-income earners, and exacerbates already-high levels of inequality:
The number of income-based tax brackets collapses from seven to three, raising rates on the lowest bracket and reducing rates for the top bracket. It also includes a special rate for business owners that pay taxes on their profits at the individual level, known as “pass-throughs,” the rise of which have contributed to much of the increase in income inequality. Indeed, this provision will benefit only the highest income earners;
The corporate tax rate nearly halves from 35 percent to 20 percent, which, according to mainstream consensus, will largely benefit shareholders and CEOs;
The alternative minimum tax that was put in place to make sure that higher income people, like the president, who take advantage of tax credits and deductions, aren’t able to zero out their tax liability, would be eliminated and;
The estate tax would be repealed – a huge cost that would benefit a handful of very wealthy individuals. In New York City, our analysis found that less than 170 estates would enjoy an average tax cut of more than $6.5 million, or, by borough, more than $2 million for 9 estates on Long Island, or nearly $12 million for 74 estates in Manhattan.
Despite promises, the plan offers insufficient details to improve the economic well-being for low- and middle-income taxpayers:
The standard deduction would increase, which could be effectively canceled out by exemptions that may be eliminated and the increased rate on low-income taxpayers;
The Child Tax Credit would be increased, but the plan does not specify an amount, nor does it propose to offer refundability for low-wage workers who need it the most, and;
The plan vaguely adds, “the committees will work on additional measures to meaningfully reduce the tax burden on the middle-class.”
The reckless partisan legislative process known as reconciliation – the same process used in the failed attempts to repeal the Affordable Care Act – is being used to ram through trillions in tax cuts without fully paying for them. That’s a double whammy to working families, as investments in education, health and transportation will no doubt be on the chopping block when it’s time to pay for these giveaways.
To partially pay for these cuts, the proposal to eliminate the state and local tax deduction (commonly known as SALT) would raise taxes by an average $7,134 for more than one million residents of New York City, according to the governor’s analysis. The deduction largely benefits high-income earners, but because elimination would be used to finance lower rates for high-income earners, low- to middle-income households would ultimately bear the burden of elimination.
FPWA, along with members of a state-based coalition, have already submitted a letter on behalf of more than 100 service providers asking the New York Congressional delegation to return to regular order by avoiding reconciliation, to not cut assistance programs such as Medicaid and food assistance to pay for these tax cuts and instead eliminate wasteful tax deductions and credits that disproportionately benefit the affluent to pay for these cuts.
Following two straight years in which poverty declined, incomes increased, and the uninsured rolls shrank at historical clips, now is not the time to slash the investments that contributed to these gains. Now is the time to strengthen investments in working families and help them succeed through better education, job training, and affordable child care. It’s what’s best for New York families and our economy.
Derek Thomas is a policy analyst for the Federation of Protestant Welfare Agencies.