The House Republican tax reform proposal would be bad news for most Mainers, according to a group assembled Monday by Democratic U.S. Rep. Chellie Pingree to examine the plan ahead of a series of congressional votes.
Pingree, who represents the 1st District, said she intends to vote against the Republican proposal in the House, but she also said she wasn’t generally against reforming the cumbersome and confusing U.S. tax code.
“I am not opposed to tax reform,” Pingree said. “I think that everybody loves the idea that you could have a tax system where you send it in on a postcard and it wasn’t complicated. I just want to make sure it benefits the middle class and it’s good for Maine.”
In a round-table discussion she convened at Portland City Hall, Pingree heard from a range of interests, including teachers, real estate agents, farmers, recent college graduates, cancer patients and parents of children with genetic disorders.
All told Pingree that the elimination of a range of deductions would hurt them and hurt Maine.
“We just can’t let this bill pass,” said Jonathan Brown, a recent college graduate who said his ability to deduct some of the interest from his student loan debt helps keep him in Maine and gives him the financial flexibility to cover unexpected costs or simply save for a down payment to purchase a home.
Sue Clifford, a cancer survivor, said the loss of deductions for medical costs could be devastating to the very ill in a rural state like Maine, where people incur large costs associated with traveling for treatment and seeing specialists.
Others said the elimination of tax credits for small businesses who hire the disabled, or a tax credit that allows farm cooperatives to stay in the black, contradicts the Republican position that the tax cuts would help businesses grow jobs and the economy.
The House plan would double the standard deduction, which would help some filers, but it also eliminates the personal exemption and the exemption for dependents.
An independent analysis of the House Republican tax bill conducted by the Tax Policy Center, a joint venture of the nonprofit Urban Institute and The Brookings Institution, found that income taxes for all filers would be reduced but the largest benefit of the tax cuts would go to the wealthiest Americans.
The analysis also shows that the legislation would add $3 trillion to the national debt during the first 10 years it is in place and more than $6 trillion in the second decade. The analysis also shows that income taxes would be cut by $1,810 on average, but the benefit for those in the top brackets would be closer to $12,000 on average.
“Three-quarters of total tax cuts would go to the top 1 percent, who would receive an average cut of nearly $213,000, or 13.4 percent of after-tax income,” the analysis states. “The top 0.1 percent would receive an average tax cut of about $1.3 million (16.9 percent of after-tax income). In contrast, the average tax cut for the lowest-income households would be just $50, 0.4 percent of after-tax income. Middle-income households would receive an average tax cut of $260, about the same relative to after-tax income – 0.5 percent – as for the lowest-income households.”
Barbara Berry, a representative from the Maine Association of Realtors, said the loss of mortgage interest deductions and deductions for property taxes paid would have a profound impact on the state’s real estate market and cost homeowners in Maine on average close to $3,000 a year.
Berry also pointed out that the reform bill would increase the amount of time people have to live in a home before selling it to avoid paying a capital gains tax. That time would increase from a minimum of two years to a new minimum of five years.
She also pointed out that the bill does allow corporations to continue to deduct state and local property taxes from their federal corporate income tax, while individuals would lose that deduction.
“We simply don’t think it’s fair for homeowners to pay for those benefits for corporations,” Berry said.
Pingree’s meeting came just three days after Ivanka Trump, the eldest daughter and adviser of President Trump, joined U.S. Sen. Susan Collins, R-Maine, for an event in Biddeford touting parts of the tax reform proposal. Pingree said much of Ivanka Trump and Collins’ focus is around the issue of helping offset the cost of child care for working families.
“I appreciate that they are trying to recognize there are issues around the affordability of child care,” Pingree said. “The challenge is there are other things that will be taken away from families that may not do enough, even the issue around the deductibility of children and after a certain number of kids you don’t get to deduct the child credit. You can give a little bit with one hand, but if you are taking away a lot with the other the balance isn’t going to work out.”
Pingree said comprehensive tax reform should be done with both Democratic and Republican support, yet the Republican legislation is being rushed through without Congress hearing from the people who would be most affected by the proposed changes, like those she met with Monday.
“As with any tax bill there are things that people will accept and appreciate, but this one is not bipartisan enough to have a broad base of support, and I think where it falls down are things that will really impact Mainers,” Pingree said.
Republicans in Congress are also still divided over the two versions of the tax reform package, one favored by Senate Republicans, who control the upper body by two votes, and one favored by House Republicans, who hold 239 seats compared to 194 held by Democrats.
The Senate Republican version of the bill disallows any deduction for state and local taxes, while the House version of the bill would allow up to $10,000 in deductions. Pingree said Republican lawmakers from states like New York oppose the Senate Republican tax reform plan
House and Senate Republicans are also divided on when a cut for corporate taxes would go into effect, with the Senate wanting to wait until 2019 for the cut, while the House would put it in place for the 2018 tax year. Republicans on both sides, so far, have agreed to lower the top marginal rate for corporations from 35 percent to 20 percent.
Send questions/comments to the editors.
