On Dec. 20, 2017, the entire Republican congressional delegation, led by their president, traipsed through the backyard of the White House for a celebratory pat-on-the-back ceremony upon the passage of their long-hatched plan to give unprecedented tax cuts to corporations and the wealthiest Americans.
Two days later, the bill was signed into law as Americans waited with bated breath to see the true effects of what they had been promised.
With one month until Tax Day, many communities are still in a world of confusion. My office has been inundated with questions from concerned constituents wondering about how passage of this plan will affect them and their filings. People want to know which deductions are still available, which deductions have been eliminated, and what the future impact of this overhaul will be.
Unfortunately, the answers to these questions illustrate exactly why I fought so hard against the passage of this law. Many deductions that Californians have relied on have been eliminated and the future impact of the overhaul will ultimately lead to increases in taxes for many Americans. Billion-dollar corporations are already benefitting from the plan while most Americans haven’t seen the pay raise that they were promised.
Most Americans that have seen a pay increase because of this plan are not those that need it most. Analysis from the Tax Policy Center shows 83 percent of the tax cuts in the bill benefit the top 1 percent of Americans, which perpetuates a closed loop of profit that doesn’t benefit lower-level employees in a business and raises the price of goods that Americans rely on.
For example, Axios reported that in the pharmaceutical industry, profits that corporations and executives are making are being used to enrich hedge funds, other Wall Street investors and top drug company executives, but it isn’t necessarily helping patients.
Another poll by Morning Consult showed that high-income earners are more likely to have noticed an increase in their paychecks because of the tax bill. The same poll found that 40 percent of voters who earn more than $100,000 said they have noticed a pay increase in the past several weeks. In contrast, 33 percent of voters who earn between $50,000 and $100,000 and only 16 percent of voters who earn under $50,000 said the same.
These are just two of the many signs that this law is not having the intended effect for most Americans. Unfortunately for those few Americans that are seeing increases in their paychecks, these surpluses will be short-lived as the elimination of important tax deductions take effect during next year’s filing season.
One of those detrimental changes that won’t take full effect until next season is the decrease of state and local sales, income and property tax deductions known as SALT. The GOP tax law limits those deductions, which impose a new, unfair double tax on middle-class families and undermines the ability of state and local governments to fund priorities like police, firefighters and teachers.
These deductions are particularly popular in California, where living expenses are much higher than other areas.
The tax law also lowers the value of a mortgage for which interest payments are tax deductible and eliminates the mortgage interest deduction entirely for home equity loans, leaving Americans with higher mortgage payment costs and falling home values. As housing prices rise in South Los Angeles, the impact of the elimination of this deduction will only be exacerbated in our community.
The tax law flat out eliminates other important deductions like those for families who suffer casualty losses in a home fire or burglary. They cut deductions for work-related expenses such as new tools, paying for a new uniform, or other required costs many working-class families incur through their job. They even eliminated deductions for moving expenses to take a new job, as well as the tax incentive for employers to cover those moving expenses themselves.
These eliminations will increase overall costs for many Americans while corporations are being offered a lower tax rate. The temporary hike in the wages some Americans have this year will not cover these increases.
Not only will costs increase, a recent analysis by the non-partisan Joint Committee on Taxation found that the new law will leave every single income group below $75,000 with a tax increase by 2027.
The damage to our community doesn’t end here. Republican leadership has already begun to answer questions about the heaping debt ($1.5 trillion, according to the Joint Committee on Taxation) they added with the passage of the tax plan with calls to cut the social safety net. An estimated 14 million people could lose their health coverage under House Speaker Paul Ryan’s proposed plan.
Fortunately, with some organization and preparation, there are still opportunities to minimize the damage created by this legislation. Last weekend, I hosted a tax resource fair at Crenshaw High School with Board of Equalization member Jerome Horton and Los Angeles school board member George McKenna III, where constituents could find out which tax credits and deductions are still available for them, receive information on credit counseling and financial planning, and get help with income tax preparation.
Events like this combat confusion and help constituents prepare for the changing landscape in our tax code and gives them a front row view of the damage being caused in Washington.
We remember the faulty theories from the 1980s and the promises of trickle-down economics. South Los Angeles is still waiting for those promises to be fulfilled.
The subject of tax credits and deductions is not the most exciting political topic in the news these days. But make no mistake, there are real consequences that have real impact on the lives of real people. I don’t plan to be silent about it.
Rep. Karen Bass is the congresswoman from California’s 37th District, which includes Culver City, Leimert Park, the Crenshaw District and parts of South Los Angeles. Her Capitol Report column runs monthly in The Wave.