The artwork on this note card was created by 5768 WRJ Art Calendar artist Césan d’Ornellas Levine.
On Wednesday, September 27, the Trump Administration, along with Republicans on the House Committee on Ways and Means and Senate Committee on Finance, released their framework for altering the tax system. While leaving the details to the Senate and House committees, the framework does offer some insight into the major changes this tax plan proposes to enact.
On the individual level, the proposal would collapse the existing seven tax brackets into three. The lowest rate would be raised from 10 to 12%, the middle would be 25%, and the top would be 35%, down from the current rate of 39.6%. Claiming to offset the raise of the bottom rate, the plan would also double the standard deduction to $12,000 for a single person and $24,000 for a married couple. It would at the same time eliminate most itemized deductions, excluding mortgage interest expenses and charitable giving. Without specifying a number, the plan states that it will raise the Child Tax Credit, as well as add a new deduction for non-child dependents. The plan would also repeal the estate tax and alternative minimum tax.
The framework would lower the corporate tax rate from 35 to 20%. It would also create a new tax rate of 25% for “pass-through” businesses, which are currently taxed at the rate of their owners (and usually falls into the top tax bracket). Finally, this plan would institute a territorial tax system in which would not tax companies on their overseas profits.
How do we interpret all these specific policies as lay people? Well, to begin, we can look to our Union for Reform Judaism policies for guidance.
The Reform Movement is committed to a tax system that “reflects our deep Jewish commitment to the achievement of a just society in which all people can live with dignity and respect.” This translates to support for tax policy that is fair and just, encouraging a shared commitment to the economic wellbeing of all Americans. As RAC Director Emeritus Rabbi David Saperstein articulated, “The tax code is a vital and effective anti-poverty tool in our country. It helps struggling families pull themselves out of poverty and into self-sufficiency.”
Our 2001 resolution, General Principles of Responsible United States Tax Policy, outlines our positions in more details. Our commitments include resolving to:
The RAC also helped craft the Faithful Budget, an interfaith effort to create a budget guided by morality. This proposal calls for a tax code that “founded on fairness and shared commitment, where those who have reaped extraordinary benefits contribute justly to the good of all.”
Given these priorities, we have significant concerns about the implications of President Trump’s tax policy proposal. In the short term, we fear that, contrary to the rhetoric used to promote it, this plan could raise taxes on middle- and low-income families.
First, the distribution of benefits: while its sponsors have characterized the plan as a middle-class tax cut, in reality, most of the cuts are going to the wealthiest Americans. According to the Center on Budget and Policy Priorities (CBPP) and Tax Policy Center (TPC), 50% of the cuts will go to the top 1% of households. As the CBPP characterizes it, this plan is “heavily tilted to those high on the income scale” and offers “only vague promises for lower- and middle-income working families.” As a piece in the New York Times summarized, this plan "would not directly benefit the bottom third of the population" while offering a "potentially huge windfall for the wealthiest Americans."
Second, the monetary impact: according the analyses of several different organizations, this plan would raise taxes on middle- and low-income families. The Center for American Progress offers an in-depth look into how families would be hurt by this plan. According to a TPC study on an earlier version of this plan, it could increase taxes for about 8.7 million families, or 20% of households. When taken as a whole, this framework has the potential to raise taxes on the middle- and low-income earners, while granting massive tax relief to the highest earning Americans.
In the long term, we are also concerned that the debt and deficit increases this plan will cause will create enormous pressure to cut spending on programs that help the most vulnerable, such as Medicaid and other vital and effective social safety net programs.
While this framework gives us significant insight into how our tax system could change, Congress still needs craft this plan into a bill, including working out details. Republican leadership has made clear that they will prioritize tax reform this fall. As the tax plan moves through Congress in the coming weeks, we will be watching vigilantly and voicing our concerns.