Week Ending November 17, 2017
The Congress is on recess next week for Thanksgiving. The next weekly legislative report will be on December 1.
House and Senate Move Tax Bills Forward and Take Aim at Health Care
On Thursday, the House voted 227 to 205 to approve the House GOP leadership’s tax bill (H.R. 1) which would provide trillions in tax cuts to corporations and the wealthy but raises taxes on 36 million middle-income taxpayers. The bill was opposed by all Democrats as well as 13 Republicans. In the Senate, the Finance Committee debated the Senate GOP leadership bill which also provides big tax cuts to corporations and the wealthy while raising taxes on millions of working families. The Senate bill was approved by a vote of 14 to 12 with all Republicans voting for it and all Democrats voting against it.
During the debate in the Finance Committee, Republican leaders added a provision to repeal a core element of the Affordable Care Act (ACA). According to the Congressional Budget Office, the change would cause 4 million to lose their health coverage in the first year and 13 million to lose their coverage by 2027, and would drive up insurance premiums in ACA markets by 10 percent. The provision would repeal the ACA’s requirement that individuals obtain coverage or pay a penalty. If the provision were to be repealed, it would destabilize the insurance market and increase premiums by over $1,000 per year for many older people and by hundreds of dollars for other middle-income consumers.
The House and Senate tax cut bills would also trigger cuts to Medicare. Both bills would increase deficits by about $1.5 trillion over 10 years. Under existing budget law, the deficits would trigger an automatic cut of $25 billion in Medicare next year and similar cuts in future years, leading to hundreds of billions in cuts to Medicare over 10 years.
Under both the House and Senate bills, reductions in tax rates for individuals and families are made temporary while reductions in tax rates for corporations are made permanent. Both bills also eliminate tax deductions that benefit millions of working families who itemize on their federal tax returns. For example, both bills eliminate the deduction for income and sales taxes paid to state and local governments. While Republican leaders describe the elimination of these key tax deductions as “simplification” measures, they are included in order to allow bigger tax cuts for corporations. In addition, over time, working families will pay higher taxes. For example, under the Senate bill, the average taxpayer with earnings below $75,000 will pay higher taxes by 2027.*
While Republican leaders claim that the tax cut bill would lead to economic growth, corporate profits are already high and borrowing costs are low. As a consequence, economists argue that the tax cuts will not lead to greater investments and economic growth. In fact, the bills would cause a loss of American jobs. Both bills also eliminate federal taxes on profits earned overseas. This change would induce corporations to move their operations and jobs to other countries to avoid federal income tax liability altogether.
We expect the Senate bill to be debated by the full Senate the week following Thanksgiving. There are a number of Republican Senators who have expressed concerns that the bill would increase deficits, raise taxes on millions of working families and treat small businesses unfairly. New concerns that it would cause 13 million to lose their health coverage give us hope that this bill can be defeated if AFSCME and other activists around the country continue to mobilize and organize against this legislation.
*CORRECTION: Due to an editing error, an earlier version of this report was unclear that taxpayers with earnings below $75,000 will see a tax increase by 2027 under the Senate tax bill.
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