EDITORIAL: GOP tax plan bad for Florida, nation | Editorial

Nov. 07--President Trump called the House Republican tax plan "a big beautiful Christmas present" for the American people.

Not unless most of them -- especially many Floridians -- want coal in their stockings.

GOP congressional leaders flubbed a chance for the first comprehensive tax reform in three decades. Though they speak of "reform," they support guaranteed big cuts for corporations and wealthy Americans perfumed with dubious promises of help for the middle class. The plan from the former party of fiscal conservatism also would add $1.5 trillion to the budget deficit over 10 years.

Maya MacGuineas of the Committee for a Responsible Federal Budget told The Washington Post that the proposal "emphasizes the need for corporate reforms and how our tax system works. But this is still a deficit-exploding tax cut at a time when the deficit is at near-record levels."

Two changes would be especially problematic for Florida.

One would end the deduction for uninsured losses from natural disasters. Losses from hurricanes Harvey, Irma and Maria would be allowed. After that, however, residents in hurricane-prone states could face ruin even if they have coverage, given the record of disputes between policyholders and carriers.

The second would eliminate the deduction for high out-of-pocket medical expenses. Florida has one of the highest rates of uninsured residents. Gov. Rick Scott and the Legislature have refused to expand Medicaid. That change could expose more Floridians to personal bankruptcy if a family member became seriously ill.

In a broader sense, though, the proposal would further hollow out middle- and lower-income Floridians, as it would in every state. The United Way of Florida ALICE report calculates that nearly half of state households are poor or struggling to achieve financial stability.

Real tax reform would prioritize help for those Americans. Instead, the Republican plan helps them the least -- student loan deductions also would end -- and helps upper-income Americans the most.

About 17 percent of households earning between $50,000 and $150,000 would pay more, according to the non-partisan Tax Policy Center. So would about 35 percent of households making between $150,000 and $250,000. The 175,000 richest families would get an average cut of $700,000.

Other changes to help the middle class would expire in five years. The congressional Joint Committee on Taxation forecasts that families making between $20,000 and $40,000 and between $200,000 and $500,000 would pay more on average by 2023, in part because the plan does too little on income indexing.

Guaranteed, however, would be the phasing out of the estate tax in six years. That would save the richest 0.1 percent of Americans roughly $5.5 billion.

Contrary to what Trump and other Republicans claim, only about 80 family farms and family-owned businesses are subject to the estate tax. Estates under $5.49 million are exempt. That limit is indexed to inflation.

Also guaranteed would be a reduction in the top corporate tax rate from 35 percent to 20 percent, though the Congressional Budget Office reports that the effective rate is 18.6 percent, because of loopholes. Other changes would make it harder for companies to shift profits and jobs to offshore tax havens, a good proposal.

Finally, the plan leaves intact the "carried interest" loophole, which allows private equity managers to tax what should be personal income at the lower capital gains rate.

At the core of this plan is the Republican dogma that cutting taxes for the wealthy benefits the middle-class by stimulating job creation. A White House economic adviser claims, without any credible evidence, that the cuts would raise middle-class incomes by $4,000.

This supply-side theory is based on the myth that the Reagan tax cuts of 1981 led to the decade's boom. A 1989 analysis by economists Douglas Elmendorf (a Democrat) and Martin Feldstein (a Republican) found that the tax cuts had "virtually no net impact" on growth.

The key factor was lower interest rates. They peaked at more than 20 percent in mid-1980, the Federal Reserve having raised them to cool runaway inflation. Once inflation began falling, so did interest rates.

Trump has embraced the House proposal, marking another betrayal of the working-class voters who backed him. His response to the opioid crisis decimating blue-collar areas has been weak. He favored a health care bill that would have hurt the working poor. He wanted to cut programs that help rural America.

House Republicans have offered a plan based on politics, not policy. Eliminating the deduction for local taxes would most penalize states that voted for Hillary Clinton. To please social conservatives, the GOP would recognize the rights of "unborn" children by allowing tax deductions for them in college savings plans. And Republicans may use the tax bill as a means to undercut the Affordable Care Act -- their white whale.

GOP lawmakers and Trump claim to be looking for a win after a year of failures. Their tax proposal, though, would be a loser for most Americans.

Editorials are the opinion of the Sun Sentinel Editorial Board and written by one of its members or a designee. The Editorial Board consists of Editorial Page Editor Rosemary O'Hara, Elana Simms, Andy Reid, Deborah Ramirez and Editor-in-Chief Howard Saltz.

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