A divided state: locals discuss tax bill


By Ashley Bunton and Josh Boak - Record-Herald/The Associated Press



WASHINGTON COURT HOUSE — President Donald Trump has touted his tax overhaul as a once-in-a-generation opportunity. Don Allen, a Republican-leaning independent voter from Wilmington, doesn’t think anybody knows enough about the latest tax bill to make a judgment about it, including the Senators who have said the bill was voted upon before it was fully read.

But, said Allen, the Republicans were elected to pass a tax overhaul.

Allen, a retired teacher and pilot, was in Washington C.H. Monday shopping at the Washington Square shopping center.

“I like the concept that the middle class will get a tax break — hopefully,” said Allen.

As he loaded his purchased items into his vehicle, Allen said, “They have to do something. That’s why the Republicans got elected…that’s what they promised to the people.”

Yet the plan Senate Republicans have embraced could force lawmakers to rewrite the tax code repeatedly for years to come.

The main reason is that some of its key planks are set to expire, thereby forcing tough choices on a future Congress about whether to renew them.

The tax cuts for individuals and families? They’d vanish after eight years.

The breaks for companies to fully expense new equipment? Gone by 2023.

Tax credits for employers that offer medical and family leave? Not after 2020.

A reduced excise tax for craft brewers and distillers? No more after 2020.

But will lowering taxes on corporations bring new jobs? Allen said he thinks so.

“What a lot of people do not realize — those who are not educated — is that all of the money that is offshore is offshore because of the taxes on corporations. If we’re competing against the world at 35 percent and everybody else is paying 15 percent, we can’t compete. If you look at the stock market and what this [latest tax bill] has done, it’s skyrocketed because the investors feel like it’s going to be green grass again for our country,” said Allen, who then asked rhetorically, “How can companies making billions of dollars pay a 35 percent tax?”

With expiration dates on the tax cuts, though, the whole setup means lawmakers will ultimately face pressure to renew these tax cuts. Letting them lapse could ignite a public backlash because people’s taxes would shoot up. When Congress faced a similar predicament in 2013, economists warned that tax hikes might tip the economy into a recession. In the end, most of the tax cuts were preserved.

Yet extending the tax cuts could require slashing spending on popular programs, possibly including Medicare and Social Security.

Teresa Bellar, 53, was shopping for second-hand clothing at the Washington Square Shopping Center Monday.

She said Social Security is her biggest concern.

“For Social Security, they say we get a raise, we don’t, because of the welfare cuts. They took $9 out of all of our food stamps and you don’t get no raise on SSI Social Security either. I’m still getting the same amount for six years now,” said Bellar. Bellar said she would not be able to pay for her basic needs if the Social Security program is slashed.

Or extending the tax cuts could mean letting the deficit climb much faster than Trump and lawmakers have promised, which brings its own economic risks.

“I’m very upset with it,” said Carolyn Byrum when asked about the possibility of the national debt increasing to offset the tax cuts. Byrum was also shopping Monday at Washington Square. She added, “I don’t think it’s going to give the middle class and down a tax break. I think we’re the ones that is going to be paying for all the upper class people’s tax breaks. I think they’re the ones who is going to get it. That’s the way it sounds to me.”

Republican lawmakers have tried to assure voters that the new tax cuts for the middle class will be protected. But the tax overhaul creates a perilous series of votes for lawmakers in coming years.

“Governing from crisis to crisis is exactly the way to put it,” says Steve Bell, a senior adviser at the Bipartisan Policy Center and a former staff director at the Senate Budget Committee.

This problem is a byproduct of the decision by the Trump administration and Republican leaders that the best way to revamp the tax code was to bypass Democrats. Under Senate rules, permanent tax cuts that raise the deficit need 60 votes. The slim 52-seat Republican majority agreed to pass tax cuts that would add no more than $1.5 trillion to budget deficits through 2027. Starting in 2028, the tax cuts can’t add to the deficit.

Because of these restrictions, Republican senators made a decision: They would make the income tax cuts for individuals only temporary, in order to pay for making the tax cuts for corporations permanent.

The Senate bill will now have to be reconciled with the similar but separate bill the House passed before it can go to Trump for his signature. For now, here are two of the big risks created by the expiring tax breaks:

MIDDLE CLASS TAX HIKES

The Senate bill would repeal the tax cuts for individuals and families after 2025.

That return to the existing rates would set the stage for a sharp tax increase for many millions of households, according to estimates by the Congressional Budget Office and the Joint Committee on Taxation. Personal income taxes would shoot up $430 billion between 2025 and 2027. The tax hikes would likely keep accelerating in the years afterward.

That means that a person with an income between $54,700 and $93,200 would likely pay on average $140 more than they currently do, according to an analysis by the nonpartisan Tax Policy Center.

Not only would their tax rates return to higher levels, but the middle class would also lose the increase to the standard deduction and the child tax credit that congressional Republicans have been touting as needed relief.

MORE GOVERNMENT DEBT

Suppose Congress were to vote to extend the tax cuts that are scheduled to expire. Doing so would also mean that lawmakers would either have to approve much higher deficits or possibly cut spending on major domestic programs. Previous attempts to shrink the deficit forced spending cuts in defense and other discretionary programs, including for scientific research and for children involved in the Head Start services.

If all the expired tax cuts were preserved and spending stayed constant, the deficit would increase by $1.9 trillion over 10 years and continue to rise in the next decade, according to estimates by the Center for a Responsible Federal Budget. Ever-rising budget deficits can ultimately depress economic growth.

“Their intention here is to the hide costs,” said Marc Goldwein, policy director at the Center. “But in the process, they’re making the tax bill less pro-growth, more complex and more vulnerable to politics.”

As she got into her vehicle to leave Washington Square Monday, Byrum was asked if she had anything to say to her senators and politicians.

Byrum said, “Guys, please think about the working man when you go to make your decisions. It’s all about the kids. Any decision they make is going to affect our children. There’s no need for that kind of a debt and we’ll never get out of that debt. Our kids will be paying, and their kids, and their kids…”

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By Ashley Bunton and Josh Boak

Record-Herald/The Associated Press

Reach Ashley at (740) 313-0355 or connect on Twitter by searching Twitter.com for @ashbunton

Reach Ashley at (740) 313-0355 or connect on Twitter by searching Twitter.com for @ashbunton