It’s difficult to say whether the tax legislation Republicans are driving through Congress qualifies as a revenue bill—or an enemies list.
It isn’t unusual for tax legislation to reward a political party’s supporters, and the GOP bill emphatically upholds that tradition by funneling its tax savings primarily toward business and top earners. But the House and Senate plans are unusual in how explicitly they fund those benefits by punishing groups that have generally favored Democrats.
Those groups aren’t the only losers: Because they are delivering such expensive tax savings to their favored constituencies, the GOP plans are forced to raise taxes on a surprisingly broad range of families just to keep their 10-year net loss of federal revenue to $1.5 trillion, itself a breathtaking amount. Future spending cuts that the bills make almost inevitable could also gore Republican voters, particularly older, blue-collar whites counting on Medicare and Medicaid.
But even within this broad reconfiguration, the bills still mark a milestone in the nation’s political partitioning by so openly favoring Republican constituencies over Democratic-leaning ones. The big blue losers in the GOP tax plans include:
Taxpayers in Democratic-leaning states: To fund other tax cuts, the House and Senate plans rely heavily on retrenching the deduction taxpayers can now take for state and local taxes, known as SALT.
Of the 20 states where the highest percentage of taxpayers take that deduction, Hillary Clinton won 16 last year. Donald Trump, meanwhile, won 26 of the 30 states where the smallest percentage of taxpayers use the SALT deduction. In that way, the bill forces blue-state families to fund tax cuts for their red-state counterparts.
Homeowners in big-city markets: The impact of the SALT changes is magnified by the House bill’s provision halving the maximum mortgage-interest deduction to $500,000. In most markets, this affects few taxpayers since few home prices exceed that threshold. But data from ATTOM Data Solutions, which tracks property information, show that provision could hurt one-fifth or more of homebuyers in the most expensive markets around major cities, particularly along the coasts—places like Seattle, Southern California, Silicon Valley and the San Francisco Bay area, Northern Virginia, and the New York City metropolitan area. All those places, like most large metropolitan centers, gave Clinton commanding margins.
Between the mortgage and SALT limits, the bills hit many upper-middle-class taxpayers, especially in blue states. The Institute on Taxation and Economic Policy calculates that by 2027 the Senate bill would raise taxes on about 45 percent of households between the 80th and 95th income percentiles in California, Virginia, New Jersey, and New York; and over one-third of such families in Oregon, Minnesota, and Illinois. Many of those families are precisely the white-collar suburbanites who have long resisted Trump.
In all, ITEP has calculated that by 2027 taxpayers in New York, New Jersey, Maryland, and California—which Clinton won— would pay nearly $17 billion more in federal income taxes. At the same time, those in Texas and Florida—which backed Trump—would pay over $31 billion less. “You can definitely see the ideological tilt here,” Carl Davis, IRET’s research director, told me.
Students: Nearly 60 percent of adults with a post-graduate degree, as well as 49 percent of those with a four-year college degree, voted against Trump. Both are losers in the House tax bill. The plan would tax as income the tuition waivers that many graduate students receive, and it would end the deductibility of interest on student debt. The Joint Committee on Taxation has estimated these changes, along with other retrenchments in the bill, would shift $71 billion in costs to students and their families over the next decade. The Senate legislation has not yet embraced either of those provisions. But, in another swipe at a higher-education system that many Republicans view as hostile, both bills would tax endowments at the wealthiest private schools.
Alternative-energy producers: The House bill leaves undisturbed the key tax breaks that benefit the staunchly Republican oil-and-gas industry, particularly the depletion allowance and a credit for intangible drilling costs. But it rolls back several credits that help alternative-energy sources more friendly to Democrats. The bill revokes a tax credit for purchasing electric vehicles, and it completely eliminates an investment tax credit for the solar industry that was scheduled to phase down but then stabilize at a lower level.
The House swipes hardest at a key wind-energy tax credit. The bill revamps that production credit—not only prospectively, but also retroactively—in ways that could threaten the financing for projects that would add up to 30 gigawatts of wind power to the grid. That’s an amount equal to one-third of existing wind capacity, noted John Hensley, deputy director of industry data for the American Wind Energy Association. Those projects are concentrated in the “Wind Belt” states from Texas through the Dakotas that are mostly represented by GOP senators—which helps explain why the upper chamber hasn’t yet embraced the House’s changes.
Younger generations: The highly diverse and Democratic-leaning Millennial and post-Millennial generations could face a quadruple whammy under this bill. Just starting in their careers, or still in school, few would receive big tax savings. But in the legislation’s aftermath, they could face cuts in domestic programs, such as education and scientific research, that invest in their productivity; and future restrictions on Medicare and Social Security, timed to bite after the GOP-leaning baby boom has already retired by the mid-2020s. Younger generations will also be handed the tab to pay the increased interest costs that will be due after the tax legislation increases the federal debt by that projected $1.5 trillion.
That grim ledger contrasts with the benefits both bills shower on business owners and the highest earners, groups that surely tilt disproportionately toward older whites. With this tax legislation, Trump and the Republican Congress are not only picking partisan favorites—they are engaging in a form of generational confiscation.
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