Dear Chair Smith, Ranking Member Neal, and Members of the House Ways & Means Committee:

On behalf of Americans for Tax Fairness (ATF) and its coalition of 420+ endorsing organizations, we write to strongly oppose House Ways & Means legislative proposals with respect to the reconciliation instructions in H. Con. Res. 14. The Committee’s proposal would enact a new suite of tax breaks for the wealthy, large corporations, and other big businesses, including by extending many provisions of the 2017 Tax Cuts and Jobs Act. If these proposals are enacted, the benefits would go overwhelmingly to billionaires and big corporations while increasing the federal debt by nearly $6 trillion over the next 10 years. 

The tax provisions of this legislation cannot be viewed in isolation from the rest of the legislative package. In its entirety, this reconciliation package proposes perhaps the most radical transfer of wealth from low and middle income families to wealthy households in American history. It does this by stripping Medicaid coverage from almost 14 million Americans; making huge cuts to SNAP for seniors, veterans, and children; and raising the monthly costs of student loans for millions of borrowers–all to finance new tax breaks mostly for the rich. With the cost of healthcare, housing, education, and other essentials already too high and going higher, financing new tax breaks to wealthy individuals and large corporations by gutting programs that help Americans afford their basic needs would be a catastrophic mistake.

The 2017 Trump tax law has been a failure for the economy and none of the promised benefits materialized for workers and families. Many middle income families actually saw their taxes increase while price gouging corporations have taken advantage of the economic situation to raise prices on families even further. By maintaining this regime of Trump tax cuts that would otherwise expire at the end of this year, the top 1% of wealthy individuals stand to gain on average a $61,000 tax cut and the top 0.1% will get an estimated $252,000, while most families will only be getting a dollar a day. When taking into account the many cuts to programs in other aspects of the reconciliation bill, most workers and families will likely see their income shrink. There is absolutely no reason to continue giving wealthy people special tax breaks while sticking families with the cost. And even if it wasn’t clear by now who this bill was written to benefit, the provisions of this bill that benefit the wealthy are made permanent while the few provisions that may help workers and families expire after 4 years or less. This means while billionaires and the mega corporations they lead get to plan for the economy in the long term, workers and families will be left concerned for their long term economic outlook. The bill also blocks the popular Direct File program, which will force taxpayers to spend hundreds of dollars a year to tax prep services rather than saving more of their own money by using a free to file tool.

This legislation is full of provisions that give special tax breaks to the wealthy while making workers and families pay more. One such provision is the pass-through loophole, also known as Section 199A, which this bill would make permanent. This provision has been widely mischaracterized by big businesses and their lobbyists as having benefitted “small businesses.” But any honest analysis of the beneficiaries from this loophole reveals that the income from pass-throughs–and therefore the benefit from the loophole–is highly concentrated at the top. One study found that 75% of it went to big businesses, while households with over $1 million of income receive over half of the tax benefit. In fact, seven billionaires, including Michael Bloomberg and Richard Uihlein, were able to cut their collective tax bills by almost $200 million in a single year thanks to the pass-through loophole. While this bill would adjust the discounted rate to 23 percent from 20 percent, it is still a huge discount available to some of the wealthiest individuals in the country and does not prevent abuse by millionaires and billionaires. There is absolutely no reason Congress should consider extending or expanding upon any provisions like 199A that would overwhelmingly benefit the wealthy while sticking lower and middle income people with the bill.

Another clear benefit for the wealthy is a provision that would make permanent the weakened alternative minimum tax. The AMT was created over 50 years ago to ensure that higher-income taxpayers could not substantially or even completely eliminate their federal tax obligations through the exploitation of excessive credits and deductions. The 2017 Trump-GOP tax law dramatically weakened the AMT, making the tax code less fair while costing low and middle income taxpayers over a trillion dollars. Collectively, the number of taxpayers paying the AMT fell from around 5 million in 2017 to just 200,000 in 2018. The Committee for Responsible Federal Budget estimates that about half of the tax benefit from maintaining the weakened AMT would go to households with incomes over $400,000, and Yale Budget Lab estimates that 93% of the tax benefit from this provision would go to the top 10% of highest-income households.

Making some provisions of this bill temporary is another example of the misleading fiscal figures used to obfuscate the long term cost of the tax provisions. As they did in 2017, Republicans  rely on sunsetting provisions at a future date to make the bill appear less costly over the budget window. Even then, the reality is that the Republicans intend to make many if not all the “temporary” provisions of this bill permanent at some future date, as they have stated on numerous occasions, in addition to other dubious scoring methods that obscure the real economic and fiscal effects of the bill including the dynamic scoring estimate and the current policy baseline of the Senate instructions. Ultimately this puts the true cost of this legislation over the next 20-30 years into the tens of trillions, and there is absolutely no reputable fiscal analysis that shows this blueprint would be deficit neutral. Decades of tax breaks and special loopholes for the wealthy and corporations have resulted in tax cut proposals being the primary policies responsible for the ever increasing debt, and this bill will turbo charge the fiscal challenges posing the nation.

Corporate tax breaks have proven to be an expensive and inefficient giveaway that does not help families. After the enactment of the Trump Tax Scam– which lowered the corporate tax rate from 35% to 21%—corporations now pay on average a lower effective income-tax rate than the average American family for the first time in nearly a century. And despite lofty promises made in 2017 by Donald Trump and Congressional Republicans, corporations used their windfall from middle class families to go on a massive stock-buyback spending spree, while giving their executives huge bonuses and keeping worker wages flat. According to analysis from the Institute on Taxation and Economic Policy (ITEP), for every $100 Congress spends on corporate tax breaks, $40 goes to foreign investors, $17 goes to the top 1% of highest-income households, and only $10 trickles down to the bottom 80% of American households. Further analysis from CBO finds that corporate tax breaks fail to generate meaningful growth, creating just 20 cents of economic output for every one dollar spent. 

The new iteration of the Trump Tax law relies on the economic argument that huge tax breaks for the rich and large corporations will trickle down to people or produce a boom in economic growth, despite that approach having unequivocally failed for decades, leaving millions of Americans economically behind. This new version, paid for by raising prices on workers and families through cuts to Medicaid, SNAP and other programs to finance trillions in tax breaks for the wealthy, including billionaires, will leave generations of Americans worse off. Americans for Tax Fairness reiterates our strong opposition to this bill and any reconciliation bill that gives tax breaks for the wealthy, large corporations, and big businesses by extending or expanding upon the 2017 Tax Cuts and Jobs Act. If you have any questions, please contact John Foti at jfoti@americansfortaxfairness.org. 

Sincerely,

David Kass

Executive Director

John Foti

Deputy Executive Director & Legislative Director