By Earle I. Mack
After a promising start, the tax bill approved by the House of Representatives this month could prove an absolute disaster for our country and for Republican electoral hopes in 2018 and beyond. The bill is not so much tax reform as it is tax deform, with many provisions of the bill reinforcing the stereotype of a Republican Party held hostage by the wealthy and Wall Street. The bill as it stands, contrary to President Trump’s promises, freezes inequality.
How else can you explain a bill that locks in dramatically reduced corporate tax cuts, but sunsets tax cuts on individuals? How else can you explain a bill that preserves carried interest for the vast majority of hedge fund managers? I’ve talked to the leaders of Congress, who all promised to eliminate carried interest, and yet they are trying to bamboozle voters. Instead of keeping that promise, they are offering a bogus amendment that barely makes a dent. It’s inexcusable.
By the way, do you own a jet? Great news, the House bill eliminates management fee taxes paid by private jet owners. Even costs related to the hiring and the training of crew members won’t get taxed! And really, what good is a jet without some bubbly? Under the House bill, champagne producers and importers are eligible for a special tax credit.
For the middle class, as Robin Leach of “Lifestyles of the Rich and Famous” would say, the tax bill is more “Champagne Wishes and Caviar Dreams!” The truth is that many middle-class families, especially in high tax states like California, New York and New Jersey, will see their taxes go up through the elimination of state and local taxes.
Don’t get sick, because the House bill eliminates tax deductions for high medical expenses. Don’t be overly ambitious, because students who have piled on college loans in the pursuit of a better career, will no longer be able to deduct. This is very bad news, considering tuition costs are likely to go up as the bill proposes to tax university income to raise $2.5 billion a year, crimping expansion, research and scholarships.
Even the revered family vacation is under assault by Washington, as a proposal to triple fees to enter our National Parks is on the table. Finally, a new proposal, stealthily hidden in the bill, would limit deductions for charitable giving to only the top 5 percent of taxpayers versus the approximately 33 percent who are eligible now.
The estimated loss of donations to charity, especially small charities, is an astounding $20 billion. That’s right, as we enter the holiday season, Congress is a regular Grinch, essentially proposing to cut the lifeblood of donations to our churches, our homeless shelters, our food banks, veterans outreach, all service organizations that make up the fiber of our communities. Is nothing sacred?
As the founder and chairman of the United States Tax Reform Council, I have advocated for commonsense reforms that benefit our middle class. Americans deserve real tax reform as promised by Republicans. It should start with ending tax breaks for the uber wealthy whose charitable contributions are spent overseas.
Billionaire George Soros recently gifted $18 billion to his activist charity, the Open Society Foundation, one of the largest transfers of wealth ever made by a private donor to a single foundation, essentially sheltering it from taxes forever. The foundation spends its funds advocating political views and enacting Soros’s liberal agenda in countries around the world.
This is not just a liberal issue. The same can be said for foundations run by Sheldon Adelson, Bill and Melinda Gates, and others whose generosity overseas is being underwritten by U.S. taxpayers. Why should middle-class Americans foot the bill for a billionaire’s pet projects in another country, no matter how worthy?
Worse, it smells of the same kind of rigged, giveaway to the rich that middle-class Americans are so angry about. Moreover, the revenue implications for deductible contributions spent overseas are significant. According to a recent report by the Hudson Institute, it is estimated that making donations spent in developing nations non-tax deductible will save American taxpayers $113 billion over 10 years. In fact, when you consider U.S. donations to all foreign charities, that could easily exceed $20 billion annually.
Congress needs to close this loophole that allows the super wealthy to use private foundations to escape taxation on contributions in foreign nations. Instead of tripling fees at national parks, Congress should encourage philanthropists to spend more at home and end the practice of having American middle-class taxpayers foot the bill for programs that provide no benefit to them.
There are a lot of good aspects of the tax bill, but it’s up to Congress to get it right by stripping out the giveaways and sending a message to middle-class Americans that they come first. Wake up, Republicans, it’s not too late to make changes to the legislation. Otherwise, kiss goodbye to control of the House and the Senate in 2018.
Earle Mack served as U.S. ambassador to Finland from 2004 to 2005. He was named chairman emeritus of the New York State Council of the Arts after serving as its chairman and chief executive officer from 1996 to 1999.
Read the full post from Earle I Mack on The Hill: http://thehill.com/opinion/finance/361878-goodbye-republican-congress