Toussaint column: No tax cut for me
I don’t need a tax cut, and I probably won’t end up getting one. Although the GOP’s tax proposal would lower my current taxation rate, loss of deductions would likely make me give the money right back.
By 2027, when the cuts expire, however, I would probably be among the 20 percent who wind up paying more. OK… I actually like supporting the US Forest Service, National Park Service, the EPA, Medicare, Social Security, public education and public television.
Unfortunately, none of these benefit from the Republicans’ proposal. Their plan will hurt not only the parts of government I like and need — notably Medicare, which a House vote already cut last week — but will also harm people I think should be protected. They include graduate students, local home-buyers and frail seniors.
Grad students? Yes, roughly 145,000 of them would see their tax bills triple or quadruple under the proposal. The reason: Grad students are typically paid for the teaching and research they do with waivers that cover tuition. Waivers aren’t taxed now, but would count as taxable income under the GOP proposal.
Because universities award an internal credit for tuition, no actual money ever appears. So grad students would have to come up with thousands in cash they typically don’t have. That’s why, across the country, grad students are freaking out, organizing on Facebook and staffing emergency phone banks.
The loss of grad students could decimate teaching resources for universities. In addition, the GOP is proposing to eliminate a deduction employers get for sending an employee to school, removing tax credits for continuing education, ending tuition credits for families and taxing university endowments. All this prompted Ted Mitchell, president of the American Council on Education, to say the GOP proposal would “make college more expensive … and undermine the financial stability of public and private two-year and four-year colleges and universities.”
The tax bill isn’t all bad news. For partnerships and sole proprietorships, the new “pass through” tax rate of 25 percent equals a tax cut, and those working in the “gig economy” do even better. Independent contractors would be taxed at 15 percent, far less than the top rate of 33 percent paid by wage-earners.
But there’s a catch. Unlike employees, who get medical benefits, self-employed artists, musicians and handymen must buy their own medical insurance. The Roaring Fork Valley’s insurance prices, among the nation’s highest, have placed a huge burden on freelancers and sole proprietors, who make too much to get help from ACA, but too little to pay for insurance here.
The GOP tax plan widens that gap by eliminating the medical expense deduction. Currently, people who spend more than 10 percent of their income on medical expenses — including those Rocky Mountain High health care premiums, deductibles and co-pays — can deduct those costs. But not under the GOP plan.
That change will also devastate many seniors and the disabled. According to AARP’s Public Policy Institute, of the 8.8 million Americans who took the medical expense deduction in 2015, nearly 70 percent of them had annual incomes below $75,000. Most of my elderly relatives have incomes below that, and many spend as much as half their income for medical needs. The change is shocking enough to induce a stroke.
Pundits also say that the GOP tax plan could dampen the upper end of the housing market because it limits the mortgage interest deduction to mortgages under $500,000. According to data from Trulia, Basalt’s average home price this year is $951,076. At that level, many mid-to-upper valley buyers would no longer receive a tax break for much of their mortgage interest. That spells bad news for local real estate brokers and contractors.
My mortgage, however, is under the cap. I’m retired and healthy, so I could say “I got mine” and not stress over this tax plan. But all in all, I would be happy to join the 400 millionaires and billionaires who wrote a public letter last week saying that they didn’t want a tax cut.
Those “one percenters” asked congress to avoid passing any tax bill that adds to the national debt and “further exacerbates inequality” in country where the top 1 percent of households now own 42 percent of the wealth.
The tax plan being proposed will add $1.5 trillion to the debt. Whatever happened to the GOP’s allegiance to a balanced budget?
Whatever happens, I can probably keep my own checkbook in balance. But my heart is with those 400 millionaires and billionaires who are “deeply concerned that revenue loss would lead to deep cuts in critical services such as education, Medicare and Medicaid.”
Morally, I too believe that the priority should not be “tax breaks for those of us who have plenty, but investing in the American people.”
Nicolette Toussaint lives in Carbondale. Her column appears monthly.