Sweeping changes to the federal tax system, pitched by Republicans as a way to spur the economy and simplify the demands on filers, must be passed by this Congress, Rep. Cathy McMorris Rodgers said.
“We’ve said all along that we would tackle tax reform in the fall,” the fourth-ranking Republican in the House of Representatives said in an interview. “We just must get it done.”
Attention in Washington, D.C., has shifted to taxes following multiple failed attempts to rewrite the nation’s health care law.
Lawmakers and President Donald Trump jointly issued a nine-page framework for revisions to the country’s tax code that, if enacted, would represent the most comprehensive changes to those laws since 1986.
McMorris Rodgers and her colleagues say the plan will make filing easier and promote economic growth, but critics argue the framework mostly benefits the wealthy and likely would increase the country’s swelling debt.
The framework reduces the number of rate categories for individual earners from seven to three, doubles the standard deduction and reduces the corporate tax rate to 20 percent, among other measures that could reduce the amount of taxes taken by the federal government. The plan also would eliminate most of the itemized deductions filers can claim on their return, though the proposal leaves in place deductions for mortgage interest and charitable giving.
McMorris Rodgers dismissed claims that the cuts favored the wealthy, a charge being leveled at the plan by Democrats. By eliminating most of the deductions and exemptions, the plan would make more of a wage earner’s income taxable, she said.
“We’ve all heard the stories of, especially those that can hire the tax accountant that figures out how to avoid paying taxes,” McMorris Rodgers said. “The goal is to eliminate those loopholes and deductions, so it’s simple and clear.”
An estimate by the Committee for a Responsible Federal Budget, a Washington, D.C., think tank made up of former lawmakers of both political parties, found that the GOP plan’s tax cuts would add $2.2 trillion to the national debt over the next decade. McMorris Rodgers said that figure ignored the potential revenue generated by American consumers with more money in their pockets.
“A lot of times they just take into consideration what current law is, and they don’t take into account the economic growth that would be a result,” McMorris Rodgers said.
The nonpartisan Congressional Budget Office will use a method called “dynamic scoring” to gauge the financial effect of the tax proposal, a method first used in 2015 that incorporates economic trends into cost estimates. McMorris Rodgers said she supported that method of analysis.
The White House, in pitching the tax plan, has said sustained economic growth of around 3 percent annually would result in deficit reduction. But experts are wary. Bloomberg News polled 26 economists following the release of the framework, and 21 concluded the system would add to the national debt.
Lisa Brown, a Democrat challenging McMorris Rodgers for her congressional seat in 2018, called the proposal “incomplete” but dismissed the suggestion it would reduce the deficit. She said the amount of lost revenue would be better spent on government projects.
“If we were going to take that same amount of funding and put it into infrastructure investments, or education investments, I think we’d get more economic growth,” Brown said.
Brown said she supported a more equitable tax system and broadly agreed with reducing the number of tax brackets, but said there still are too many unknowns in the Republican framework, including the income levels that would determine what rate a person would pay.
Matthew Sutherland, who also is running for the seat under the Democratic banner, said the plan’s elimination of itemized deductions in pursuit of simplicity would unduly burden the working class.
“There’s a deduction for teachers who buy material for their classes, and for students who are paying interest on their loans,” Sutherland said. “We do want the system to be easier and more user-friendly, but that does not mean that we get rid of deductions for families that need them.”
Eric Agnew, an independent candidate for the seat, said the plan amounted to another attempt at “trickle-down economics,” the Reagan-era idea that cutting taxes for the wealthy would result in economic prosperity for all.
“When we tried trickle-down economics in the past, three things happened: the rich got richer, worker wages stagnated and the national debt grew,” Agnew said in a statement. “It didn’t work then, it won’t work now.”
One of the deductions the plan would eliminate is the itemized amount paid in state taxes. While state income taxes have been allowed as a write-off, lawmakers in Congress representing states with no income tax had been battling for years to get a permanent deduction for local sales tax. The provision was included in a 2015 spending bill.
More than a million filers in the state of Washington took advantage of the itemized sales tax deduction in 2015, according to data compiled by the National Association of Counties and verified by the Washington Department of Revenue. Those filers wrote off a combined $7 billion in tax burden, saving an average of about $7,400 on their taxes.
McMorris Rodgers said she wanted to see how ending the deduction would affect Washington state taxpayers, but noted that the tax plan also would end the deduction for state income taxes for those living in states with an income tax. The current deductions require the federal government to increasingly give up their revenue any time a state elects to raise its taxes, McMorris Rodgers said.
“It seems like the federal government, then, is in a position where the states are increasing taxes, and the federal government is paying a big portion of that bill,” she said.
Lawmakers are meeting this week in committee to discuss the tax proposal. McMorris Rodgers said she hoped the bill would make it to the floor of the House of Representatives within the next few weeks, and that she hoped Democrats would join in crafting the legislation.
“I think there’s a recognition that we need a simpler, fairer tax code,” McMorris Rodgers said.