GOP Tax Cuts Could Cost Seniors in the Long Run

2017-11-04T14:03:29+00:00October 2nd, 2017|Budget, Medicare, Social Security|

The GOP had scarcely emerged from the defeat of their latest Obamacare repeal legislation when they pivoted lightning-quick from healthcare to taxes.  The tax reform plan the party unveiled last week may ultimately endanger the well-being of older Americans more than the vanquished healthcare bill.  Here’s why:  The nonprofit Tax Policy Center estimates that the GOP tax plan will reduce federal revenues by a net $2.4 trillion in the next 10 years.  As the deficit grows, Congress will look to cut spending.  Republicans have already called for deep cuts to Social Security and Medicare, and would no doubt come after those programs looking for massive savings. Seniors’ earned benefits could be used as piggy banks to pay for reckless tax cuts that largely benefit the wealthy.

Americans for Tax Fairness put it his way:

“[The tax plan’s] eye-popping cost will lead to deep cuts in Social Security, Medicaid, Medicare, and public education that will leave working families in the cold.”- Americans for Tax Fairness

… while House Democratic leader Nancy Pelosi predicted:

“Make no mistake: after Republicans’ tax plan blows a multi-trillion dollar hole in the deficit, they will sharpen their knives for Social Security, Medicare, Medicaid.” – House Minority Leader Nancy Pelosi 

Budget hawks (including President Trump’s budget director Mick Mulvaney and House Speaker Paul Ryan) have long dreamed of cutting Social Security and Medicare.  Once their tax plan balloons the deficit, they will have the perfect excuse for gutting those programs – even though Social Security and Medicare Part A are completely self-funded by workers’ payroll contributions; they contribute not a penny to the deficit.

In fact, the budget cutters’ knives are already sharpened. The 2018 House Budget resolution calls for nearly $500 billion in cuts to Medicaid over the next decade.  That would be devastating for the 1.4 million seniors who rely on Medicaid for long-term care, and millions of others who are dually eligible for Medicaid and Medicare.  The House budget resolution also includes nearly $500 billion in cuts to Medicare over the next ten years.  Under the House budget plan, Medicare would be privatized and the eligibility age raised from 65 to 67 (an effective benefit cut). If these changes are enacted, seniors will be left to fend for themselves in the private insurance market with vouchers that may not keep up with rising costs.

Despite President Trump’s protestations that the GOP tax plan won’t benefit the rich, that’s precisely who would reap the biggest gains.  (Trump himself could save an estimated $1 billion in taxes!)  According to the Tax Policy Center’s analysis:

“Taxpayers in the top 1 percent would receive about 50 percent of the total tax benefit from the tax overhaul, with their after-tax income forecast to increase an average of 8.5 percent.” – Tax Policy Center 

On the other hand, some in the middle class would see their taxes go up.  One in seven households earning between $48,000 and $86,000 per year would pay more in taxes next year; the proportion would double during the next decade.  For households earning $150,000-217,000 a year, one third would immediately pay more in taxes.

Republicans claim that the tax cuts will pay for themselves through intense economic growth.  They have tried this before (Most recently, with the Bush tax cuts in the early 2000s), and it didn’t work out.  Instead, deficits swelled, reinforcing budget hawks’ instincts to cut programs for the most vulnerable members of our society, including and especially seniors.  One of the (repentant) architects of the failed trickle-down economics of the 1980s, Bruce Bartlett, put it best in a recent column for USA Today: 

“Tax cuts and tax rate reductions will not pay for themselves; they never have. Republicans don’t even believe they will, they are just excuses to slash spending for the poor when revenues collapse and deficits rise.” – Bruce Bartlett, former Congressional economist