Congress assesses impact of Tax Cuts and Jobs Act

The tax-writing House Ways and Means Committee held its first hearing under Democratic control on the impact of the Tax Cuts and Jobs Act since the Republican-led law’s passage at the end of 2017.

The emphasis of Wednesday’s hearing was on who got left behind in the far-reaching tax overhaul. “Today, the committee begins its long overdue examination of the 2017 tax law that Republicans passed in a mere 51 days, without any hearings or expert witness testimony,” said House Ways and Means Committee Chairman Richard Neal, D-Mass. “More than a year after the passage of a $2.3 trillion tax giveaway, this will be the first time we will have a thorough review of the new law and its impact on American families and the economy. So today we begin with some big picture questions about fairness and who the Republican tax law left behind. We already know it does not treat all taxpayers alike. Instead, the law’s proponents made choices about what (and whom) to prioritize, and what (and whom) to leave out.”

Democratic lawmakers, particularly in blue states, complained about the $10,000 limit in the state and local tax deduction and said it affected more than high-income taxpayers. Rep. Tom Suozzi, D-N.Y., also pointed to problems with the new Form 1040, saying he had heard reports of a 200 percent increase in errors with new tax forms. “We hear all this talk about tax simplification,” he said. “The new administration has made it worse. One other group that’s been left behind is charities and not-for-profits. If you’re a synagogue or church and you provide parking to employees, they will have to pay this additional tax.”

The U.S. Capitol building is reflected in Washington, D.C.
The U.S. Capitol building is reflected in Washington, D.C.

Republicans on the committee staunchly defended the law. "Repealing the Tax Cuts and Jobs Act, as Democrats have pledged, will not only damage the U.S. economy, kill jobs, reduce paychecks, and send American jobs overseas,” said Rep. Kevin Brady, R-Texas, the ranking Republican on the committee, who spearheaded passage of the tax law in 2017. “It will most hurt women, minorities, individuals with disabilities, and workers without a high school education. It is still relatively early to judge the full impact of tax reform — that will take years. But the early signs are extremely encouraging, ones that both parties should welcome.”

The president of the Communications Workers of America, Chris Shelton testified about how corporations like AT&T had benefited from the corporate tax cuts, but had laid off employees and used much of the savings for stock buybacks.

“Are the tax cuts delivering robust job creation? At AT&T, the answer is an emphatic no,” he told the committee. “Instead of the 7,000 new jobs AT&T’s Randall Stephenson promised if the bill passed, AT&T has actually eliminated over 12,000 jobs.”

He claimed AT&T received a $21 billion windfall from the Tax Cut and Jobs Act and is projecting $3 billion in annual tax savings going forward. The company’s annual report disclosed that it boosted executive pay and suggested that after refunds, it paid no cash income taxes in 2018 and slashed capital investments by $1.4 billion. Shelton also pointed out that AT&T has closed seven U.S. call centers in the past four months while running two call centers in Mexico that employ nearly 2,500 people and keep growing.

Shelton also discussed the lack of accountability from employers while major companies lobbied for the tax overhaul. “We tried while the tax cut was being debated to get our major employers to sign something that said that they would give our members $4,000 in raises because that’s what everybody was touting and saying would happen," he said. "Well, we didn’t get one employer to sign that pledge.”

In response to a question from Rep. Judy Chu, D-California, Shelton discussed why one-time bonuses offered by some companies after the tax law passed in 2017 offered just a temporary boost, “A $1,000 bonus doesn’t even come close to a $4,000 wage increase," he said. "A $1,000 bonus after taxes is not a whole lot of money.”

Nancy Abramowitz, a professor who directs a tax clinic at the American University Washington College of Law, also voiced skepticism about the Tax Cuts and Jobs Act. “To the extent the TCJA dangled the prospects of eased tax liability, tax simplicity and improved job prospects, we have not seen any real evidence of results for the working poor,” she said. “Moreover, it would appear that key features of the law benefiting middle- and higher-income taxpayers and businesses may result in direct as well as indirect adverse consequences for those on the lowest rungs of the income scale.”

Jason Oh, a professor at the UCLA School of Law, pointed to the inequities of the Tax Cuts and Jobs Act. “The TCJA disproportionately benefits the rich,” he said. “For comparison purposes, let us focus on households that earn less than $50,000 and those that earn more than a million. In 2019, low-income households are projected to save roughly $200 in taxes – one car payment or five trips to the gas station. Millionaire households are projected to save over 300 times more, or roughly $64,000 dollars. That’s either a lot of gas or a brand-new BMW X-5. Of course, richer households paid more taxes before the law change, and so it is somewhat unsurprising that they are saving more in taxes.”

Douglas Holtz-Eakin, president of the American Action Forum and a former director of the Congressional Budget Office, said it was too early to assess the impact of the Tax Cuts and Jobs Act. “The TCJA, while imperfect, addressed many of the most anti-growth elements of the old Tax Code, and U.S. economic performance has improved meaningfully since the passage of the TCJA, including objectives like top-line economic growth, business investment and wage growth,” he said. “This is promising, but not definitive. At this juncture it is simply premature to pass judgement on the TCJA.”

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