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OpinionEditorial

Tax overhaul aims to reshape social policy, punish blue states

And this is unlikely to be the end of the hurt put on our region.

House Speaker Paul Ryan, left, and Senate Majority

House Speaker Paul Ryan, left, and Senate Majority Leader Mitch McConnell listen as President Donald Trump speaks during a meeting on tax reform on Sept. 5, 2017. Photo Credit: AP / Evan Vucci

Any change in tax policy will create winners and losers. And lawmakers historically have linked taxation with social policy. But the effort being pushed through Congress is not really tax reform, and it’s not simplification. It is punishment for those who have homes in the suburbs and those who went to college, for cities and states that take care of their poor, for municipal labor unions and even for teachers who buy supplies for their classes. It thwarts renewable energy and rewards those selling fossil fuel.

If President Donald Trump wanted to deliver the tax plan he touted in his campaign, the one that would let Americans file their returns on a postcard, “put H&R Block out of business” and lower rates on corporate profits responsibly, he could have easily done so. It could have been simple to understand and reasonably fair. It could have avoided raising the deficit. All the GOP had to do is get rid of the loopholes in the tax code and lower rates to compensate taxpayers for the exemptions and deductions and credits that were eliminated. And then do the same for corporations. There still would have been winners and losers, but the shifts would have been minimal, logical and defensible.

But that’s not what happened in the bills jammed through the House of Representatives and Senate without one Democratic vote.

Instead, the changes punish residents in Democrat-dominated states that have high costs of living, and institutions and behaviors Republicans view as liberal. They reward many residents in Republican-dominated states that have low costs of living. They lower corporate tax rates far more than the loopholes being eliminated will pay for, saddling all taxpayers with debt. This is happening at a time when corporate profits are the highest in our nation’s history. The changes slash the estate tax paid only by the very richest Americans — all at a time when those wealthiest few have seen decades of outsized gains in their net worth. Republicans are deliberately widening our nation’s income divide.

And the bills do nothing to make it simpler to fill out those IRS returns.

The plans double the standard deductions taxpayers can claim while eliminating or slashing itemized deductions for state and local property and income taxes, as well as for mortgage interest. That will give many middle-class taxpayers in low-cost “red” states a larger deduction, while reducing deductions for middle-class taxpayers in costly areas like Long Island.

Ending deductions altogether and lowering rates to compensate for the loss would have been the simpler, fairer way to go, but it would not have accomplished the specific GOP goal of punishing regions that spend more on “New York values” like education, health care and well-compensated public servants.

The GOP plan, still being finalized, contains significant social engineering. It erases the tax-deduction for interest on college loans, but creates tax-advantaged 529 accounts to fund private school tuition and home schooling. It creates a tax on the largest university endowments, and a new tax on graduate school tuition that is waived when those students teach or do research. And it ends the employer-sponsored child-care tax credit.

The economic theory driving much of the tax plan, trickle-down economics, also drove GOP tax reform 35 years ago. But these tax cuts come in a different environment and on a different system than the ones in the 1980s. Then, top individual tax rates were 70 percent. Now they are less than 40 percent. Then, corporate tax rates were about 50 percent. Now they are 35 percent, by far the lowest in seven decades. Then, the idea that huge tax cuts to the rich would spur real wage growth for the middle class and reduce the deficit was credible. Now it isn’t.

The Senate and the House are now reconciling two bills that will hurt a considerable number of Long Islanders, causing tax bills to rise by many thousands of dollars. Home prices are expected to decline as the deductions that defrayed housing expenses go.

Unfortunately, the fight to keep our state and local income tax deductions is likely lost. Our congressional delegation needs to focus now on making sure the alternative minimum tax is killed. That tax, originally passed in 1969 to snare 155 millionaires, hurts tens of thousands of Long Islanders. It was supposed to go away as part of this reform, but crept back into the Senate bill after the GOP needed to find money to fund its big giveaways to the superrich. Our delegation should also be fighting to push down the rates in brackets that hit middle-class Long Islanders.

This is unlikely to be the end of the hurt put on our region. On Wednesday, House Speaker Paul Ryan spoke openly of coming after funding for Medicare, Medicaid and Social Security, even beyond the automatic cuts to these crucial programs the proposed tax cuts force. Having added $1.5 trillion to the deficit almost entirely by cutting taxes on corporate profits and huge estates, Republicans propose to hack that deficit back down to size by cutting the benefits the elderly rely on and deserve.

Elections have consequences, and the GOP won in 2016. But there’s always another election, and legislation has consequences, too.

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