Trump Should Reverse Course on Tax Reform, Casey Says

October 11, 2017

President Donald J. Trump
The White House
1600 Pennsylvania Ave., N.W.
Washington. D.C. 20500

Dear President Trump:

There is no more urgent priority for our nation than rebuilding the middle class by raising wages and creating good-paying jobs. Seven years ago, during the depths of the Great Recession, the unemployment rate in Pennsylvania reached 8.7 percent and 554,000 Pennsylvanians were out of work. By January 2017, Pennsylvania’s unemployment rate was 5.2 percent and is now at 4.9 percent. Nationally, we have seen 83 months of consecutive job growth which ended this past month. Despite the economic recovery, too many families in Pennsylvania are still struggling to find full time employment, balance unstable work schedules and make ends meet. There are a host of steps the federal government can take to help middle class families. Investing in infrastructure, renegotiating bad trade deals that stack the deck against workers, raising wages and reforming our tax code are essential in order to rebuild the middle class. I write today about the need to reform the tax code in a way that helps middle class families and workers get ahead.

You’ve stated "tax reform will protect low-income and middle-income households, not the wealthy and well-connected”. On September 27, the so-called Big Six, which includes Director of the National Economic Council (NEC) Gary Cohn, Treasury Secretary Steven Mnuchin, and the House and Senate Republican leadership, released a framework that does not reform our nation’s tax code, but rather puts in place obscene tax giveaways for the super-rich at the expense of middle class families and the vulnerable. This framework, which was negotiated in secret by congressional Republicans, will devastate middle class families and workers by raising their taxes, cutting Medicare and Medicaid and forcing cuts to investments in education. There should not be one penny in tax cuts for the wealthiest, biggest corporations and special interests in Washington financed by cuts to Medicare, Medicaid, our schools and other vital programs for middle class families. The wealthy disproportionately benefit at the expense of the middle class. This plan will do nothing to drain the swamp. In fact, it will feed the swamp creatures.

According to the Tax Policy Center, by 2027, the Republican proposal will increase taxes on 30 percent of Americans making $50,000 to $150,000 and reward billionaires and big corporations with significant tax cuts. In 2018, the average tax cut for those in the top 1 percent would be $146,470, the average tax cut increases to $234,050 by 2027.¹ Half of Pennsylvania households earn less than $53,600 a year, Americans making under $48,000 may see a tax cut of around $30 a month, but some would see a tax increase of $530 a year. According to the Center on Budget and Policy Priorities, by 2027 80 percent of the tax benefit will go to the top 1 percent.² The Republican plan proposes to double the standard deduction, but it also eliminates the $4,050 personal exemption which taxpayers claim for themselves their spouse and their children. Instead of doubling the deduction the proposal is really just combining the standard deduction and exemptions into one bucket. A family of four would gain $11,300 in standard deduction, and simultaneously lose $16,200 in personal exemptions. In addition, the Republican tax plan appears to eliminate the head of household filing status and larger standard deduction used by single parents or a grandparent raising their grandchildren. Loss of this filing status could result in a tax increase for single parents and grandparents.

The Republican tax plan proposes eliminating the state and local tax deduction which is utilized by 1,776,000 taxpayers in Pennsylvania. The average state and local tax deduction for Pennsylvanians earning between $50,000 and $100,000 a year is almost $7,000. The state and local tax deduction prevents double taxation — so individuals are not taxed twice by federal and state governments on the same income.

Meanwhile, under the guise of lowering taxes for small businesses, the Republican tax plan actually contains special loopholes that allow hedge fund managers on Wall Street and wealthy real estate developers to drastically reduce their taxes. Nearly 90 percent of the benefits of this proposed tax cut would go to the top 1 percent of earners, this is because most small businesses don’t pay anything close to the top tax rate on their profits.³ The proposal also eliminates the estate tax for America’s 5,500 richest families, at an average cost of $27 billion a year. The Center for Budget and Policy Priorities estimates only 150 families in Pennsylvania will pay the estate tax in 2017,⁴ as it only applies to estates worth more than $10.98 million.

The Republican federal budget proposal for 2018 increases the deficit by $1.5 trillion, over the 10-year window. It also proposes cutting Medicare by $473 billion and Medicaid by more than $1.056 trillion. In all, the Republican proposal will blow a hole in the deficit and mandate over $1.5 trillion in cuts to Medicare and Medicaid to pay for tax cuts for the wealthy and big corporations.

Every percentage point reduction in the corporate tax rate costs $100 billion dollars over 10 years. The Republican plan, which calls for a 15% rate reduction, will cost $150 billion a year.⁵ The annual cost of your proposed corporate rate cut is equivalent to the total 2017 funding for our entire military’s personnel costs (salary, healthcare, travel, retirement contributions, etc), plus NASA’s entire budget. Its cost is almost 30% of our entire non-defense discretionary budget. This will put a strain on programs that families depend on, like K-12 education, Head Start, public transit and money to repair roads and bridges.

I believe moving forward with this partisan proposal will be to the detriment of working Americans across the country who rely on their elected officials to advance sound policy that can increase wages and create jobs for our middle class families. Tax reform will impact every aspect of our lives and economy but you and Republican leaders have chosen to engage in a wholly partisan process.

For months. Democrats have called for bipartisan engagement on tax reform. However, Republicans continued closed-door negotiations. In August, Democratic Senators presented the following principles for reform consistent with those that guided the successful bipartisan 1986 tax reform:

Any reform to the tax code must center on helping middle class families and workers get ahead. Our tax system must ensure that all residents of Pennsylvania have a fair shot at financial stability in today’s economy. That starts with helping the middle class and promoting wage growth and financial security for all. The Republican proposal cuts taxes for the wealthy, raises taxes on working families and, along with the Republican Budget proposal, will result in drastic cuts for Medicare and Medicaid. I hope you and Republican party leaders will reverse course, abandon this partisan process and come to the table to work with Democrats on a tax proposal that benefits all Americans, not just the wealthy and the powerful.

Sincerely,

Robert P. Casey, Jr.
United States Senator