The outline of the tax proposal released by President Trump and Republican House and Senate leaders should worry all Pennsylvanians for multiple reasons.
First, the plan calls for adding $1.5 trillion to the deficit over the next ten years. This is remarkably hypocritical, given that Republicans blamed President Obama for deficits even as they declined year after year after the end of the Great Recession. And it is economically risky at a time when the economy is growing. Republicans claim that tax cuts will generate much faster economic growth. This is unbelievable, given the record of previous huge tax cuts during times of economic growth. And, of course, most professional economists, on both the Left and Right, do not believe it at all.
Second, the likely result of added deficits will be new pressure to cut federal spending to balance those deficits, with most of those cuts coming from health care and human services. In Washington, like Harrisburg, right-wing extremists conveniently forget the role of tax cuts in creating deficits and use those deficits as a cudgel to achieve their goal of cutting spending. This is the wrong path to take. More, not less, public investment is needed to deal with a population that is aging, infrastructure that is collapsing and an educational system that is inadequate in the 21st century.
Third, it appears that the tax proposal largely benefits the wealthiest Americans at the expense of working people and the middle class. Proposals to reduce the corporate tax rate, create a territorial tax system, and tax pass-through businesses at the corporate tax rate rather than personal mostly benefit the top 1%, as does the repeal of the estate tax.
Finally, the proposal to repeal the deductibility of state and local taxes is especially damaging to states like Pennsylvania that provide more public investments than about half of the states. Pennsylvanians will see their taxes go up as a result of this provision.
At a time when the income gap between rich and poor continues to go up, a proposal that reduces taxes on the rich and will ultimately lead to spending cuts to programs that are designed to produce broadly shared prosperity, is exactly the opposite of the kind of tax policy we need in the United States and Pennsylvania.