When most Americans were preparing for the Christmas season in the second half of December, a number of House Democrats released a massive tax hike proposal.
Congresswoman Rosa DeLauro (D-CT) and Congresswoman Jan Schakowsky (D-IL) introduced the Medicare for America Act, legislation that would increase taxes on American families and businesses large and small.
To start, the legislation introduced by Reps. DeLauro and Schakowsky repeals the entire Tax Cuts and Jobs Act passed by the GOP in 2017. This would impose significant tax increases on individuals:
-The proposal would restore pre-TCJA tax brackets resulting in a tax increase for Americans at every income level.
The TCJA reduced taxes for a family of four with annual income of $73,000 by $2,058, a 58 percent reduction in federal taxes. A single parent with one child with annual income of $41,000 has seen a tax cut of $1,304, a 73 percent reduction in federal taxes.
-The proposal would cut the child tax credit in half from $2,000 to $1,000. According to IRS data, over 23 million families take the credit.
-The proposal would cut the standard deduction in half from $12,000 to $6,300 ($24,000 to $12,600). An estimated 93 percent of filers will take the standard deduction when filing their 2018 taxes.
-The proposal would increase the Alternative Minimum Tax – increasing the number of filers who pay the tax from 200,000 taxpayers to 4 million.
In addition, the proposal would reinstate the State and Local Tax Deduction, a provision which overwhelmingly benefits upper income earners.
The legislation also imposes significant tax increases on businesses:
-The proposal would repeal the 20 percent small business deduction available to entities organized as pass-through entities (LLCs, sole-properties, S-corps). This is a $415 billion tax cut.
-The proposal would raise the corporate rate from 21 percent to 35 percent. This would again make the U.S. corporate rate the highest in the developed world.
-The proposal would restore the outdated, worldwide system of taxation. This would make the U.S. one of the few developed countries in the world to double tax foreign source income.
-The proposal would repeal 100 percent, full business expensing which gives businesses a zero percent rate on new investment.
In addition to full repeal of the TCJA, the legislation includes several new tax hikes.
-The legislation would create a new, 5 percent surtax on taxpayers earning $500,000 per year, resulting in a top income tax bracket of 44.6 percent. This provision is not indexed to inflation, so it will each grow to hit more and more Americans over time.
-The Obamacare payroll tax will increase from 0.9 percent to 4 percent and the Obamacare net investment income tax on individual and small business capital gains will increase from 3.8 percent to 6.9 percent. Neither of these provisions are indexed to inflation so it will each grow to hit more and more Americans over time.
-The legislation also repeals tax-preferred Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). 25 million families and individuals currently utilize HSAs and 30 million utilize FSAs. These accounts empower healthcare choice by allowing to save and spend their own funds for healthcare expenses tax free. HSAs have triple tax benefits – dollars are tax free when funds are contributed, tax free when they are spent, and any gains accrued by investing dollars are tax free.
-The legislation increases taxes on alcohol and tobacco products.
-The legislation creates a new tax on sugary drinks equal to one cent per 4.2 grams of sugar. Funds from this tax will be sent to the Obamacare Prevention and Public Health Slush fund, a fund that was used by the Obama administration to push blatantly partisan, politicized policies.
This legislation is far from an outlier within the House Democrat conference.
Democrats plan to change the rules of the House to remove the three-fifths majority requirement to raise taxes and incoming Speaker Nancy Pelosi (D-Calif) has repeatedly promised that House Democrats will raise taxes. Incoming House Budget Chairman John Yarmuth (D-KY) has voiced support for a tax hike on businesses and new members such as Rep. Alexandria Ocasio-Cortez (D-NY) have called for sweeping tax increases.