The Senate and the House have now passed a Concurrent Budget Resolution for fiscal year 2018. There are differences between the two resolutions, but both do away with federal deductions for state and local taxes and both benefit the wealthy. Eliminating the federal deduction delivers a blow to NJ because it would increase the average annual tax bill for a NJ resident by more than $3,500, according to the Tax Policy Center. Other negative aspects of the resolutions include severe cuts to Medicaid and Medicare.
The effort to end the federal deduction in the Senate was led by Sen. Shelley Capitol, R-West Virginia, whose state in 2015 received $2.07 from Washington for every $1 in federal taxes paid, more than 47 other states. NJ on the other hand got just 74 cents back for each $1, lowest among the 50 states. This amendment, for which all Democrats present voted against was approved 52 to 47. The full resolution which also disadvantages the middle class and poor was approved 51 to 49. The Senate operates on a slim margin: 52 R’s and 48 D’s.
In the House the concurrent budget resolution had already been approved 219, (only R’s) voting Yes and 206 (all D’s plus 18 R’s) voting NO.) Citing their concerns over ending the federal deduction, NJ Reps. Lance, LoBiondo and Smith voted NO, but Frelinghuysen and MacArthur voted YES.
President Trump has been personally lobbying House Republicans this week to swallow the Senate budget version to speed up the process so that congress can move on to tax reform. However, if the House were to balk and insist on negotiating a compromise that melds the Senate and House resolutions there would need to be reconciliation meetings which might reinstate the federal deduction and be fairer to the middle class. Such would require some seven more Republicans, and we have two – Frelinghuysen and MacArthur – who are already under pressur from constituents to change their position. So we must pressure all our R’s, in particular Frelinghuysen and MacArthur, to support continuation of the sales tax deduction and seek modifications in the proposed budget and ultimate tax plan.
The Senate on Thursday night in passing the concurrent budget bill also took a significant step toward rewriting the tax code. The so-called “tax reform” is indeed “reform” in as much as it advantages the rich and disadvantages the middle class and poor. The resolution calls aspirationally, but without specifics, for a $1.1 trillion reduction in Medicaid funding over the next 10 years and reducing Medicare spending by $487 billion during the same period. A disaster. Also the Senate budget resolution includes a trigger to block a filibuster, reducing from 60 to 50 the number of senators (plus V.P. Pence) needed for passage of a tax bil without having to negotiate with Democrats.
U.S. Sen. Cory Booker, D-N.J., said in an interview after the vote: “There has to be a fundamental principle of tax fairness, not just between low-income wage earners and high-income wage earners, but the tax fairness really has to be between the states as well.” We want fairness in any new tax bill, which now is headed toward only enriching high income earners, and we want to continue with the sales tax deduction which represents fairness between the states. Both Sens. Booker and Menendez have our backs on these matters.
The decision as to whether the House will insist on changes in the budget resolution could be reached in a matter of days, so concerted activism is needed now. The final tax package is more complex. Issues regarding Medicare, Medicaid, ignoring the middle class, and many more remain in danger. If both houses have the Republican votes, the tax bill could pass quickly, but lobbyists and informed activists will be busy and likely will slow the process.
One might think that because Republicans control the presidency, the Senate and the House it is their way or the highway. However, the Republican margin in the Senate is slim, House Republicans are rife with dissenting points of view, and the President has little understanding of the bills, changes his position frequently, and undermines his own effort. On important matters the Democrats are unified in opposition. So our cause is not lost. Our best hope is that Republicans can’t muster the needed votes and have to resort to negotiating with Democrats. That is our pathway to a fairer outcome.