A Republican-led tax overhaul will help middle-class Oregonians and boost economic growth but suffered from ineffective messaging, Rep. Greg Walden told Oregon reporters in a call Tuesday.
Republicans in Congress are eager to pass their tax package, which will permanently slash corporate tax rates and provide smaller temporary tax cuts to middle- and lower-income Americans, by Christmas.
Walden, a Republican who represents a vast swath of Central and Eastern Oregon, joined all but 12 House Republicans in voting for the bill Tuesday. No Democrats voted for the measure.
The Senate passed the bill in an early-morning vote Wednesday, and the House will have to vote again Wednesday as well because three provisions violated Senate rules and had to be removed.
“This tax cut was not targeted at people making really huge salaries,” Walden said. “It’s targeted at middle-class Americans.”
The bill nearly doubles the standard deduction, from $6,350 to $12,000 for single people and $12,700 to $24,000 for married couples filing jointly. It also increases the child tax credit from $1,000 to $2,000 per child. Those increased deductions are temporary, though, and will revert to the current amounts in 2025 unless Congress extends them.
Increasing the standard deduction means more Oregonians will be able to take it instead of itemizing their deductions, Walden said. Nearly 70 percent of Oregonians in his district now take the standard deduction, and Republicans estimate the change will cause 90 percent of Americans to take it.
If the bill passes the House again Wednesday and President Donald Trump signs it, changes won’t take effect until 2018. That means taxes Oregonians file in the spring won’t reflect the changes, but workers will see changes in their payroll deductions starting in January.
The bill also changes the country’s seven income tax brackets, which now tax between 10 percent and 39.6 percent. The new tax brackets range from 10 percent to 37 percent, and it takes a higher income to qualify for the top bracket. All tax brackets will see decreases in 2018, but the wealthiest taxpayers will get bigger breaks. By 2027, economists predict, most Americans making less than $75,000 will pay more in taxes than they would have without the bill.
The tax plan also cuts the nominal corporate income tax rate from 35 percent to 21 percent. Many large corporations already pay less because of deductions and tax credits, enough that the effective corporate tax rate is closer to 19 percent, according to the nonpartisan Congressional Budget Office.
Making more money available to corporations and allowing business owners to immediately write off the full cost of capital investments will improve economic growth, Walden said. He said he had spoken to Oregon employers who said they would add jobs because of their tax breaks, but he wouldn’t name any of those businesses.
“This measure really was also about rekindling the economy,” Walden said. “We’ve seen a very lackluster recovery during the past few years.”
Corporations are beholden to their shareholders and aren’t going to respond to tax breaks by adding jobs because that won’t maximize shareholder value, said Nancy Boever, co-founder of Indivisible Bend, a grassroots progressive group that formed after Trump’s election. Before moving to Bend, Boever was a director of financial planning at a corporation in Silicon Valley.
“They’re not just going to hire more employees or give that money to employees in the form of higher salaries,” she said.
The tax plan is “corporate welfare at its most extreme,” Deschutes County Democratic Party chairman Jason Burge said.
And it’s unpopular among voters. A CNN poll released Tuesday morning showed only one-third of respondents supported the tax proposal, while 55 percent opposed it. More than 70 percent of the respondents said they and their families would be worse off or about the same as they are now if the tax overhaul became law.
“The more time the tax policy experts and the general public have to look at the bill, the uglier it’s going to get,” Burge said. “I don’t see it working for a lot of Americans, and Republicans are going to see the results of that in 2018.”
Walden, meanwhile, said the bill is unpopular because of a messaging problem. Once voters understand its provisions, they like it, he said.
He waved off estimates that the bill would add billions or even more than a trillion dollars to the federal deficit, saying anticipated economic growth would offset the bill’s $1.5 trillion price tag.
While the nonpartisan Joint Committee on Taxation had not released its estimate of what the latest version of the tax plan would cost by the time the House voted on Tuesday. The Tax Foundation, a right-of-center tax policy think tank, estimated that it would increase the federal deficit by a net $448 billion during the next decade.
Changes made during the conference committee process removed some of the House and Senate bills’ most contentious bits, including proposals to tax graduate students for their tuition waivers, eliminate deductions for student loan interest and remove a $250 deduction teachers can take for buying supplies for their classrooms.
But the final version of the bill still eliminates a portion of the Affordable Care Act that requires everyone to buy a health insurance policy or pay a penalty. Without the penalty, fewer healthy people are expected to sign up for coverage, meaning people still participating in the insurance marketplaces are likely to see higher premiums.
Taxpayers will be able to deduct up to $10,000 in combined state property and income taxes, a provision Walden said he fought for. Oregon has some of the highest income tax rates in the country, though it also has no sales tax and lower property tax rates than most states.
The bill also exempts larger inheritances from a 40 percent estate tax, meaning the descendants of wealthy individuals can receive up to $11 million ($22 million for married couples) tax-free. This will help family farms in Oregon, Walden said, though farms make up a small percent of taxable estates.
“I believe the proposal and the changes herein will really benefit our farmers and ranchers, small business owners and the guy with a backhoe and a truck,” Walden said.
— Reporter: 541-633-2160, firstname.lastname@example.org