Bringing Fairness and Rationality to Our Tax Code
Our federal tax code is an unfair and overly complicated mess, and the partisan Trump-Roskam tax bill passed last year has only made things worse. About 80 percent of its benefits are going to big corporations and the very wealthy, while it adds $2.3 TRILLION to the federal debt. The only way to plug a budget hole that large is by cutting or privatizing Social Security and Medicare benefits – something that House Speaker Paul Ryan and Peter Roskam have talked about for years. We can’t let that happen.
Rather than cutting the retirement benefits that millions of Americans have worked for and deserve, we ought to revisit the tax bill that Roskam helped ram through the Congress without a single Democratic vote. And rather than rewarding corporations whose PACs contribute millions to Roskam’s campaign fund, we ought to enact meaningful reforms with these principles in mind:
- Restore SALT deductions. The Roskam tax bill capped annual deductions for state and local taxes (SALT), including property taxes, at $10,000. This will have a disastrous impact on many local families. In fact, the Tax Policy Center has calculated that our Sixth District of Illinois has the 12th highest percentage of taxpayers who claim these local tax deductions of all 435 congressional districts. The fact that nearly half of his own constituents claim this deduction didn’t prevent Peter Roskam from making SALT a target. In fact, the Illinois legislature is looking for ways to “work around” the cap on SALT deductions in Roskam tax bill to mitigate its negative impact on Illinois taxpayers. All of the suburban Republicans in the Illinois House recently voted in favor of such an effort, including House Republican Leader Jim Durkin.
- Restore top tax rate for millionaires. Trickle-down doesn’t work. It never has and never will. Yet the Roskam tax bill slashed the top rate for the wealthiest Americans, even though they’re the ones who benefit most from his cuts in corporate and pass-through tax rates. We should restore the top rate of 39.6 percent for those with annual incomes of $1 million or more. Not only will this restore more progressivity to our tax code; it will help reduce the huge deficit that Roskam’s tax bill created.
- Reverse the cut in pass-through income. The Roskam tax bill included a huge cut in rates for business-owners who file as limited liability corporations (LLCs). This is horribly regressive and just shifts the tax burden from owners to workers, who aren’t eligible for this break. Already, tax lawyers and accountants are busy trying to figure out how doctors, lawyers and other highly paid professionals can qualify for this new tax break. It ought to be repealed.
- Eliminate the cap on taxes for Social Security and Medicare. Currently, only the first $127,200 in annual earnings is subject to the payroll tax for Social Security. Everything above that amount remains untaxed. It is a very regressive way to fund one of our most successful progressive programs. Unsurprisingly, the Roskam tax bill left that loophole in place. Rather than targeting Social Security and Medicare benefits for cuts to pay for a huge tax giveaway to the very wealthy, we ought to insist they pay their fair share to support those essential programs.
- Tie corporate tax breaks to actual investment. The Trump-Roskam tax bill made huge cuts in corporate tax rates on the assumption that companies would use those savings to invest in their businesses and give pay-raises to their workers. So far, the evidence suggests that’s not the case. Instead, businesses have used the extra cash to buy back their stock – raising their share prices – and to raise dividends for their stockholders, including their executives and investors from overseas. Rather than a general cut in corporate tax rates, we ought to target those cuts to across-the-board acceleration of depreciation, including investment tax credits, bonus depreciation and shortening of overall (tax) depreciation lifetimes. This will give corporations a tax cut when they actually make a capital investment rather than Roskam’s approach of cutting overall rates and hoping for the best.
- Target tax credits to businesses that add jobs in targeted fields. Our country is losing millions of good-paying jobs in the manufacturing sector, due to foreign trade and automation. Our tax code ought to help those U.S. companies and workers to compete. For example, companies could receive a five-year tax credit for jobs they add in targeted sectors like manufacturing, with rules allowing the government to recapture that revenue if the companies don’t create and maintain the jobs they promise.
- Consider using border taxes to make U.S. manufacturing exports more competitive. The Roskam tax bill cut corporate tax rates to influence where businesses incorporate. But that’s less important than where they locate their manufacturing plants, since those plants create more jobs and a much bigger boost to the U.S. economy. This can be better addressed through border adjustment taxes negotiated with our trading partners than in simply slashing corporate taxes across-the-board.