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Tax reform proposals would cut more than taxes

28 Nov 2017 | Posted by | 2 Comments | , , ,

Though presented by Congress as a sensible approach to provide relief from a complicated tax code, Congress’ tax reform proposals would actually increase the deficit and trigger $150 billion in automatic cuts to entitlements and discretionary programs that include vital transportation and infrastructure investments.

A Harvard-Harris poll released yesterday showed widespread support for a simplified tax code, as well as tax cuts for individuals and small businesses. That is good news for the Senate as it considers tax reform this week. However, the same poll found that 54 percent of Americans oppose the current tax reform proposals because they will hurt them financially.

More Americans might consider joining the ranks of the opposition if they truly understood the net impact of the tax reform measure. Namely, because the proposed tax cuts actually increase the federal deficit by $1.5 trillion over ten years, they trigger a little known or understood federal law that will automatically require $150 billion in cuts to federal entitlement and discretionary programs every year for the next ten years to make up the difference. (Learn more about the Statutory Pay-As-You-Go Act here.)

The potential loss of deductions for state and local income and property taxes or the possible elimination of the write off for interest paid on your mortgage are small potatoes compared to the real cost and impact of these future cuts.

Federal spending in 2016 was about $3.5 trillion. Nearly, 65 percent of that money paid for entitlements like Social Security, Medicare, Medicaid and other discretionary programs for health care and unemployment. Another 15 percent went to national defense and six percent went to service the interest on our burgeoning national debt. Just seven percent, about $245 billion, paid for everything else — affordable housing, economic development, job training, education, natural resources, public safety and yes, the $2.4 billion we invest annually in public transit improvements and construction.

The current tax proposal will require Congress to cut $150 billion dollars annually from federal spending. And considering that the President wants to increase defense spending, these cuts will have to come from the other programs, like infrastructure. The end result will leave our country poorer, sicker and less secure. Cities and towns, big and small, will continue to struggle with more traffic congestion, poor air quality, and less competitive regional and local economies.

The impacts of deficit-driven tax reform couldn’t come at a more inopportune time for transportation infrastructure. The Highway Trust Fund, which funds most surface transportation investments, is solvent only because of massive transfusions of cash and creative accounting gimmickry. The President’s 2018 budget proposal is already recommending deep cuts, phase-outs or the complete elimination of popular and oversubscribed programs like the program that supports all transit capital investments and the popular Transportation Investment Generating Economic Recovery (TIGER) Program.

The law requires Congress to pay for the tax cuts in this budget-busting bill. But unfortunately, Congress will likely choose to pay the tab by cutting the programs that reinvest in our people and their communities, including critical transportation programs.

After clearing committee late on Tuesday, a final vote on the Senate proposal could happen as soon as this Thursday. It is time to tell your elected officials that the price of this tax bill is too high to pay.

2 Comments

  1. Pingback: Today’s Headlines – Streetsblog St. Louis

  2. Reply

    V

    1 week ago

    surely cutting out the personal exemption deduction cannot counter balance those whose itemizing is over 24000 including medical expenses that are being slashed? My calculations with the information given thus far indicates those filers would pay about 1000.00 more.

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