The $1.5 trillion GOP tax-cut plan released today contains most of the same flaws as earlier versions of their plan. It will do little to improve, and could hurt, the well-being of many Arkansas children and families.
Our top takeaways include:
- The plan dramatically cuts taxes for the wealthy and our most profitable corporations while leaving out, or doing very little, to help struggling Arkansas families.
- It would significantly increase our nation’s deficits. If recent budget disasters have taught us anything – the Kansas debacle comes to mind – it’s that tax cuts targeting the wealthy do not pay for themselves, do little to promote economic growth, and would eventually have to be paid for through deficit spending and budget cuts. Arkansans would likely have to foot the bill for these deficits through future cuts to Medicare, Medicaid, and investments that help our economy grow and help families meet their basic needs and succeed.
- Arkansas families would lose again at the state level because many provisions in the state tax code are tied directly to the federal one. Also, a large part of the state budget is federal revenue, so if it’s reduced, we would likely see tighter state budgets and the tough decisions that come with them.
The plan will dramatically cut taxes for the wealthy and our most profitable corporations. Although the GOP has made hay over keeping the current top individual tax rate of 39.6 percent, fewer wealthy taxpayers will have to pay it. That’s because the income level subject to the top rate was increased from $470,700 to $1 million for married-couple families. This, combined with favorable treatment for investment income like capital gains and dividends (earned mostly by the wealthy), eliminating the Alternative Minimum tax that historically ensured the wealthy paid something, eliminating the estate tax over time, and a corporate tax cut make it inevitable that the wealthy would be the biggest winners in the tax plan.
The corporate tax cuts are especially noteworthy. The corporate rate was cut from 35 to 20 percent. Again, the wealthy would be the primary beneficiaries as corporations use their tax cut to give back higher dividends to their stockholders. One of the biggest tax cuts will be for “pass-through” companies, which would now have their tax rate capped at 25 percent. Those include sole proprietorships, partnerships, LLCs, and other companies owned by rich individuals who pay taxes on the profits they earn not through corporate taxes, but through their individual returns. The owners of pass-through companies, like President Trump, would see their taxes dramatically cut.
The so-called “middle-class” tax cut is anything but that. Low- and middle-income families would see much smaller, if any, tax cuts. While the standard deduction would almost double to $24,000 for married couples and $12,000 to individuals, it would be offset to a degree by eliminating the personal exemption and increasing the bottom tax rate to 12 percent. While the child tax credit would increase from $1,000 to $1,600, its basic structure was not changed to help low-income families. It would also now be available for more wealthy families. There also was no increase in the federal Earned Income Tax Credit (EITC), a change that would have helped low-income working families. Any gains that low and middle-class families might see under the GOP plan would, in the long run, likely be wiped away by budget cuts to federal programs in a myriad of areas including health care, food assistance, financial help with college and more. The “savings” have to come from somewhere, and in this case, it’s likely to be us.
We hope that members of our Congressional delegation – who represent a relatively poor state, after all – will demand that party leaders go back to the drawing board and come up with a better plan for the hard-working families of Arkansas.
AACF Executive Director