Trump’s tax plan: for students, families and schools, the devil is in the details

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by Félix Pérez

Everyone is familiar with the adage “If it’s too good to be true, it probably is.”

When President Trump unveiled his tax plan last month, he promised it would simplify the tax code and could lead to lower tax bills for ordinary taxpayers. But one need not look too deeply to discover that his trickle-down model has been tried before and benefited the wealthiest disproportionately at the expense of working families and the public services on which they rely, such as education and health care.

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Without getting too far into the weeds, according to the Tax Policy Center, the plan’s core components include:

  • Reducing the corporate income tax rate from 35% to 15%.
  • Eliminating the alternative minimum tax and the estate tax, taxes that traditionally affect higher earners.
  • Cutting the top income tax bracket (single filers earning more than $423,500) by 14.6 percentage points.
  • Reducing the tax on carried interest, used by some of the richest people on Wall Street, from 23.8% to 15%.
  • Repealing the 3.8% surtax on investment income of high-income taxpayers that is used to pay for the the Affordable Care Act.
  • Eliminating common tax deductions such as those used to offset medical costs or state and local taxes.
  • Reducing the number of tax brackets from seven to three.

Americans for Tax Fairness has this to say about Trump’s plan:

Trump’s tax plan is actually a massive $6 trillion giveaway mostly to the rich and corporations. Nearly half the tax breaks go to the top 1%. Millionaires and billionaires like Trump would get a $1.1 million tax cut each year. Someone making $50,000 would get a tax cut of just $400. Nearly nine million middle-class families with children would face higher taxes.

One group that stands to lose on the president’s tax plan is student loan borrowers. Under Trump’s proposal, the federal tax deduction for interest paid on student loans would be eliminated. “There are 43 million Americans with over $1.4 trillion in student loan debt already being subjected to unfair treatment by the system, like prohibiting them from being able to refinance federal student loans, just like you can with a mortgage. And now Donald Trump wants to make it even worse, taking away a modest tax deduction for the interest on their loans as part of his scheme to deliver a windfall in tax loopholes for big corporations and the wealthiest,” said One Wisconsin Now Program Director Analiese Eicher.

The plan released by Trump contains few specifics. Nevertheless, Kansas Gov. Sam Brownback’s “real live experiment” provides some hard lessons. Families, students and public education, indeed the state overall, have suffered under Brownback’s “disastrous tax plan” passed in 2012. “Kansans have grown tired of credit rating cuts, crowded schools, one-time transfers and budget crises. . . Kansans resent the fact that thousands of business owners pay no state income taxes at all, while working people do,” wrote the editorial board of the state’s largest circulation newspaper, The Kansas City Star.

Eric Toder, co-director of the Tax Policy Center, described Trump’s tax plan in unflattering terms. “This would be Kansas on steroids,” Toder told Slate.

One news story summed up the effect on the state’s public education system this way: “Public schools have been adjusting to declining revenue for the past two years by closing classrooms, firing teachers and raising local property taxes.”

Another news story, set in the second year of Brownback’s plan and titled “Kansas Schools Close Early as Sam Brownback Tax Cuts Squeeze Revenue,” opened this way:

Income-tax cuts in Kansas championed by Governor Sam Brownback have led to credit downgrades, political turmoil and deepening budget deficits. This week, they’ll start forcing schools to close early.

As lawmakers work to erase a projected $800 million budget gap for the fiscal year starting July 1, at least eight school districts that saw their funding cut this year because of a greater-than-projected slide in state tax collections will begin shutting down before the scheduled end of classes. Dozens of others have eliminated or cut programs.

Duane Goossen, the former Kansas secretary of administration, told The Guardian, the money from Brownback’s tax cuts has gone to a small group of wealthy Kansans while the state’s budget has been left with a roughly $1 billion shortfall. Its school system has suffered year after year of cuts. The non-partisan Tax Policy Center calculates Trump’s tax plan would cost $6.2 trillion over the first decade.

Kansas Gov. Brownback

“We are a cautionary tale. It sounds great, everybody gets a tax cut and it’ll balance – but it just doesn’t work,” Goossen, now a senior fellow at the Kansas Center for Economic Growth, said to The Guardian. Goossen explained the similarities between Trump’s and Kansas’ tax plans are “unbelievable.”

A group of researchers that studied Brownback’s tax cut concluded that the “primary effect of the policy was to induce high-income taxpayers to recharacterize income as pass-through business income.” The researchers at Indiana University and the University of South Carolina found evidence suggesting that responses to income tax exemption for the owners of limited liability companies and other pass-through businesses “were overwhelmingly tax avoidance” rather than job creation. Trump’s income is derived from 500 of these businesses that would receive this huge tax giveaway.

For his part, Brownback welcomed Trump’s tax plan. “I’m pleased to see them put that plan forward. Because it will work, and it will stimulate small-business growth, and it will stimulate employment.”

Kansas’ students, families and educators, however, can’t wait for Brownback’s experiment to be behind them.

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