An Open Letter to My Constituents on the GOP Tax Plan
Thank you for contacting me about H.R. 1, the Tax Cuts and Jobs Act. I appreciate the time you took to write to me and I welcome your thoughts on this very important issue. I oppose this legislation based on how it so negatively affects the middle class, does nothing to expand our economy, and adds $1.5 trillion to our nation’s debt.
On November 2nd Congressional Republicans unveiled their tax plan. The legislation raises taxes on the middle class and bestows the wealthiest one percent of our country and multinational companies with 80 percent of the benefits, at a total cost of $1.5 trillion charged to the nation’s credit card. It eliminates important tax deductions that middle class families depend upon, such as the elimination of the deductibility of state and local taxes (SALT). This will raise taxes on the middle class. Almost 200,000 of my constituents benefit from the deductibility of SALT, averaging $31,193 every year using this benefit. On the other hand, the tax plan allows businesses to keep their deductibility for state and local taxes. Other tax deductions that have been eliminated under the plan include:
- Elimination of deductibility for medical expenses;
- Elimination of deductibility for interest paid on student loans;
- Employees who now receive tuition payment benefits from their employer without having it count as income, would have this benefit be taxed as income;
- Slashes in half the current cap on the deductibility of mortgage interest paid; and
- Eliminates the $7,500 tax credit for consumers who purchase electric vehicles
- To add insult to injury, the proposal also eliminates the deduction for personal property losses resulting from natural disasters. Californians just experienced the worst wildfires in our state’s history with over 14,000 homes lost or damaged at a cost of at least $3 billion. Abandoning these families, I find to be especially cruel.
The bill also limits the mortgage interest deduction (MID) to $500,000 on newly purchased homes. This change, along with doubling the standard deduction, would cause a significant number of homeowners who currently itemize their deductions and claim the MID, to claim the standard deduction instead. This effectively eliminates a critical incentive for home ownership at a time when home ownership rates are at a 50-year low. Housing is widely looked to as a critical indicator of our national economy and reducing the MID could deal our economy and middle class homeowners a significant economic setback.
Under the tax plan, multinational corporations receive a tax cut of $1 trillion by the lowering of the corporate tax rate from 35 percent to 20 percent. The bill also eliminates the estate tax in 2024. Today, estates valued below $5.5 million for individuals and $11 million for couples are not taxed at all, and fewer than 1 in 500 estates in our country are currently subject to the tax each year. What the tax plan does is immediately double the exemption on the estate tax, and after six years, repeals it entirely. Under the plan estates over $11 million and up would not pay anything. The plan also eliminates the alternative minimum tax (AMT) which was designed to prevent high-income taxpayers from escaping their “fair” share of the income tax burden.
In addition to adding $1.5 trillion to the national debt, the Republican Fiscal Year 2018 (FY18) budget includes substantial cuts to Medicare. Congress passed the FY18 budget to clear the path for this tax plan by allowing the Senate to pass tax legislation with 51 votes rather than the 60 that are usually required. The FY18 budget calls for $473 billion in cuts to Medicare over ten years, slashing the social safety net for so many seniors, and at the same time it gives a massive tax cut to the super-wealthy and multinational companies.
The Administration claims their tax plan will “pay for itself” by boosting economic growth and create jobs without adding to the deficit. This is bad math. The massive cuts at the top are not paid for—meaning there is a shortfall of $1.5 trillion of debt over ten years for our children to pay. In the early 2000’s, the promise of massive tax cuts was that jobs would be created and there would be economic growth. Instead, the outcome was $1.8 trillion of debt. The investments that pay off the most are education, jobs, and infrastructure. These critical areas always expand our economy and create jobs. By eliminating the deductibility of key items and raising taxes, the middle class bears the brunt of this tax plan. It should be the reverse. The middle class should be relieved of some of its burdens.
All my best,
Anna G. Eshoo