GOP tax reform's sting on Black community would be significant

“As we release the details of the plan, we will show all the different impacts to the people,” argued Mnuchin on Sunday during ABC’s This Week as he pressed hard against charges that the package was tailored more for the top 1 percent than middle class and low-income Americans.

For Mnuchin, the GOP tax reform proposal is actually a “jobs bill:” fewer taxes on business offer greater latitude to grow capital, thereby translating into more investment and more employment.

Observers had been bracing for this since the election. The president had frequently named tax reform as a top priority, ranking it along with “ObamaCare” repeal and infrastructure as highly coveted policy goals in the first two years before Congressional midterms. And when a surprising deal was cut with House and Senate Democratic leaders to temporarily lift the debt ceiling and avoid a government shutdown, many observers suspected tax reform factored in the mix.

To get a debt ceiling lift, as well as future reversal of the Trump administration’s axe on Obama-era DACA immigration orders, Democrats would need to offer as little resistance as possible on deep tax cuts that would certainly siphon money away from crucial domestic programs.

Repeal of the ACA – still, ultimately, law of the land – seems unreachable for any number of political reasons, Republican infighting and indecision not least among them. But, tax reform is historically known as that one issue glue that helps Republican rank and file stick together. Hence, there is growing consensus among seasoned observers that tax reform could be the first major legislative achievement of the Trump administration. It could, conceivably, unify Republican majorities in the House and Senate for full passage while (plausibly) forcing some moderate Democrats in light red, purple or easily flippable states and Congressional districts to vote for it despite official party objections.

And as significant as tax reform might be, its policy-wonkish nature — with various concepts, equations and projections sure to confuse a short-attention-span public – is something that could actually save it from failure. It doesn’t carry much sex appeal in a headline as does, say, NFL anthem protests and the president lashing out at the Mayor of San Juan, Puerto Rico. But the impact of the current GOP tax reform bill, if enacted, could be far reaching and profound for decades.

Among the first pre-Congressional Budget Office measurements to drop, the joint non-partisan Urban Institute-Brookings Institution’s Tax Policy Center finds that the massive tax cut proposed by the administration – which would, among other things, cut corporate taxes down to 15 percent – dents federal revenues by more than $3.2 trillion over the next two decades. Business tax cuts would cost the government $2.6 trillion, for example, during the first decade while a repeal of the longtime Republican-targeted estate tax would cost taxpayers $240 billion; in the next decade corporate tax cuts would continue to drain federal coffers while increases in individual income taxes will be expected to offset that. That has many analysts alarmed and wondering exactly how the federal government expects to make money, and how much of the corporate tax cut tab will citizens be left with.

Conservative think tanks, such as the Heritage Foundation, aren’t worried. “The tax reform outline ... is a promising indication that leaders in Congress and The White House are not willing to let this generational opportunity go to waste,” was Heritage expert Adam Michel. “Pro-growth tax reform is essential to raising the take-home pay of American families and creating more jobs for American workers.”

That, however, doesn’t allay the concerns of others. Even if jobs are created, significant hits will be felt in cuts to key domestic programs in a White House effort to “rob Peasant Peter to pay King Paul,” joked one senior Congressional aide close to the tax reform legislation discussions who spoke on background. “This is basic math here. They want to drastically cut the money the government makes and have everyone, but businesses and the wealthy, pay for it. Meanwhile, there’s less money for safety net programs.”

The impact on low-income earners and historically disadvantaged populations, such as Black communities that earn less in median income than whites, could be substantial. And middle-class taxpayers in the 80th to 95th percentile income range would actually see a tax increase over the next decade while taxpayers earning over $730,000 a year would see the most tax cuts.

The 1 percent would “receive about 50 percent of the total tax benefit; their after-tax income would increase an average of 8.5 percent,” notes the Tax Policy Center report. However, “[b]etween 2018 and 2027, the average tax cut as a share of after-tax income would fall for all income groups other than the top 1 percent.” If the bill were passed and enacted this year, by 2018, middle-income earners making between $150,000 to $300,000 would only see a tax cut of 1.2 percent while high-income earners making over $730,000 would see an 8.5 percent increase.

Policy experts such as the Economic Policy Institute’s Hunter Blair, ripped the GOP plan. “[It] does absolutely nothing for the roughly 61 million households—about 35 percent of all households—whose income already falls below the current standard deduction and personal exemption amounts,” Blair tells the Tribune. “In fact, the only tax change that had a chance of making it to into the pockets of those households, an increase in the child tax credit, was made explicitly nonrefundable seemingly just to be sure it wouldn’t.

To Camille Busette, Director of the Race, Prosperity and Inclusion Initiative at Brookings, the “overall direction of the tax plan is to improve after-tax income for wealthy individuals and for corporations.”

Busette stresses the need to examine how these tax cuts could impact Black households, which earn less compared to their white counterparts. “If we take the average annual income, under the current tax reform plan, Black households will pay on average $672 less in income taxes, and will gain on average around $1000 in after -tax income,” Busette explains to the Tribune. “Those who earn less, will receive fewer benefits, paying close to the same as now in taxes and gaining close to nothing in after-tax income.”

“Trump’s budget calls for cuts in a range of social programs from housing subsidies to programs that help support health and other supports are important to low income and poor Americans. A miserly budget like that, in combination with the tax reform plan, could mean the loss of some very important services.”