(This note on the Tax Reform bill was sent this morning to U.S. Senators Chuck Grassley and Joni Ernst.)
I ask you to vote no on the final tax reform measure being considered by the U.S. Senate this week for these reasons:
As a low wage worker, I don’t see any benefit to me personally or to people like me whose annual income is less than $30,000.
By reducing revenue to the federal government the tax bill will force cuts in areas not covered by the bill. While cuts are needed in defense spending, my concern is Medicare, Medicaid and Social Security will have to be cut. As a low-wage worker I rely on those programs.
I spoke with my state legislator, a Republican, and he said Iowa is waiting to see what the Congress does to craft 2018 state tax legislation. As you should know, Iowa is failing to generate enough tax revenue to fund programs at reasonable levels. Cuts in revenue based on federal legislation are unneeded tampering in this time of fiscal stress.
Thanks for reading my email.
Response from Senator Chuck Grassley, Dec. 6, 2017
Dear Mr. Deaton:
Thank you for contacting me about tax reform. As your Senator, it is important for me to hear from you.
I appreciate hearing your thoughts on tax reform. There is broad consensus that our tax code is in dire need of reform. It was last reformed just over 30 years ago. Since that time it has grown out of control in length and complexity with taxpayers cumulatively spending over 6 billion hours annually complying with its dictates. Small businesses are estimated to be burdened with $15 to $16 billion annually in compliance costs. These are resources that would be better spent growing their businesses. Moreover, our outdated corporate tax system puts American companies at a competitive disadvantage as they try to compete in a 21st century global economy.
The Senate recently passed tax reform legislation that would make good on our commitment to provide significant tax relief to the middle income taxpayers, while making the tax code simpler, fairer and more pro-growth. Some of the middle-income tax relief in the bill includes nearly doubling the standard deduction, doubling the child tax credit from $1,000 to $2,000 per child, reducing the current law 15% bracket to 12% and the current law 25% bracket to 22%, meaning hardworking Americans will see more money left in their pocket to spend, save, and invest as they see fit.
According to an analysis by the Joint Committee on taxation, on average every income group will experience a tax cut with the largest percentage tax reductions in the middle income groups. As an example of the tax relief under the bill, a median income family of four would see a tax cut of nearly $2,200. Moreover, the reform bill would make the tax code more progressive with taxpayers earning more than $1 million shouldering a larger share of the tax burden than they do under current law.
Additionally, the Senate bill lowers the burden on middle class families by eliminating the tax penalty in the Individual Mandate. Iowans who have decided that Obamacare is too expensive for them are penalized by the federal government. More than 52,000 Iowans in 2015 were forced to pay the individual mandate tax. Over 80 percent of those who paid the tax made less than $50,000 a year. That’s a tax on working families, and this legislation does away with it.
The bill also enacts much needed tax relief for job creators providing a significant deduction on business income for small businesses, effectively lowering their top tax rate by nearly 9 percentage points. Moreover, the bill lowers the statutory corporate rate down from the highest in the develop world to 20% in 2019. This will allow U.S. corporations to create more jobs and pay higher wages. Economists generally agree that a significant portion of the corporate tax falls on workers in the form of reduced wages. Estimates of the burden of corporate tax on workers range from 25% to more than 70%. While the exact amount may be debated, one thing is clear; corporate rate reduction results in bigger paychecks.
I understand some are concerned that tax reform will add to the deficit. I agree it is important for tax reform to be done in a fiscally responsible way. Our tax reform proposal is designed to spur economic growth, which will result in more taxpayers and more revenue for the federal government. If tax reform spurs as little as .4 percent of additional growth on an annual basis that would equate to about $1 trillion in additional revenue. In truth, if we are ever to get a grip on our growing debt we can’t continue to settle for the anemic growth of less than 2% we have experienced since 2010.
I also understand that there is concern that the bill will trigger a budget rule under the Statutory Pay-As-You-Go Act of 2010, which some have claimed could lead to across-the-board cuts in certain government programs, such as Medicare. However, the Act has never been enforced since its enactment. Congress has acted to prevent a sequester on 16 occasions, and there is no reason to believe that Congress won’t act this time. Moreover, both Majority Leader McConnell and Speaker Ryan have pledged to work to ensure that these spending cuts are prevented.
Tax reform will provide middle class Americans with financial relief, make U.S. industry and workers more competitive, create jobs across the country, and get the economy growing again after years of stagnation. There’s still work to be done. The legislation now goes to conference and will have to be reconciled with legislation passed by the House of Representatives. This is a historic opportunity to help Americans from every walk of life. I look forward to working with my colleagues in both chambers to deliver on our promise for middle class tax relief.
Again, thank you for contacting me. Keep in touch.
Response from Senator Joni Ernst, Dec. 22, 2017
Dear Mr. Deaton,
Thank you for taking the time to contact me about federal programs, such as Medicare, that support folks during their retirement. Your feedback is critical to me, as I know many of our elderly neighbors rely on the valuable services of this program. I am committed to ensuring that Medicare remain accessible and viable for current and future recipients.
On December 22, President Trump signed into law H.R. 1, the Tax Cuts and Jobs Act, the first comprehensive tax reform in over 30 years. The law will provide significant tax relief for low- and middle-income families by doubling the standard deduction and child tax credit and lowering rates across the board. For a family of four earning the median income of $73,000, it will reduce taxes by $2,058. A single parent with one child who earns $41,000 would see a $1,300 tax cut.
It also makes significant changes to the taxation of businesses in order to make the United States more competitive with other developed countries and stimulate wage growth for middle-class workers. It would lower business tax rates for job creators of all sizes, impose a one-time tax on assets that businesses hold overseas, and establish anti-abuse taxes designed to prevent tax evasion.
As you shared with me, concerns have been raised in regards to the Medicare program and the pay-as-you-go rule, also known as PAYGO. PAYGO was first established by Congress in 1990 as a mechanism to help eliminate and reduce the deficit through immediate reductions to certain mandatory spending programs, such as Medicare. Social Security and Medicaid are not subjected to this rule. Since enacted, Congress has waived this rule from going into effect on numerous occasions.
Our seniors paid into the Medicare program with their hard-earned, taxpayer dollars with the assurance that Medicare would be an available option upon their retirement. We must preserve and protect Medicare for Iowans receiving benefits today, as well as for our children and grandchildren. We made a promise, and as your U.S. Senator, I am committed to keeping that promise.
On December 22, President Trump also signed into law H.R. 1370, which provides funding for government operations through January 19, 2018. Further, you will be pleased to know that H.R. 1370 also waives PAYGO, and no subsequent cuts to Medicare will go into effect. I supported this effort.
I appreciate you taking the time to share your input with me on this important matter. Feel free to contact me with any further information as I always enjoy hearing from Iowans.
Joni K. Ernst
United States Senator