The 2018 Congressional Budget and Tax Cuts: What It Could Mean for People With Disabilities and What We Must Do
This year’s Congressional budget process is particularly important for people with disabilities and their families. The recently-passed House and Senate fiscal year 2018 budgets set overall spending and revenue targets for the next 10 years. But beyond this basic function, Congressional budget writers have been clear that an underlying goal of the 2018 budget is to set the stage for a massive tax cut bill. The Arc is concerned that significant loss of federal revenue will result in cuts to programs for people with disabilities
The Senate passed its Budget on October 19 and the House passed the same Senate Budget a week later. House Speaker Paul Ryan (R-WI) is aiming to pass a tax cut bill before Thanksgiving that, under budget rules, can be passed by a simple majority vote in the Senate. A great deal is at stake. Here’s what it could mean for people with disabilities, and what we must do.
What is in the Congressional Budget?
The Budget allows for up to $1.5 trillion to be added to the deficit over 10 years. Congressional committees are now drafting tax cut legislation that does not have to be paid for unless it goes above $1.5 trillion. But if the cost of tax cut legislation goes above that amount, then any amount over that could come directly from cuts to Medicaid, Medicare and many other programs that are critical for people with disabilities. The Budget assumes, but does not require, some $5 trillion in spending cuts over 10 years, as well as optimistic projections of economic growth, to make up for lost tax revenue.
What Do We Know About the Proposed Tax Cuts?
While the tax cut legislation has not yet been developed, the tax plan framework released by President Trump and key Congressional leaders in September indicates that its benefits may be heavily tilted towards wealthy individuals and corporations. Several types of taxes that it proposes to eliminate or reduce are only paid by very wealthy households, such as the estate tax that is only paid by individuals with estates worth over $5.5 million. See The Arc’s statement on the tax framework.
What Will The Arc Be Watching Out For?
At this point there are many unknowns. Here are five things that The Arc will be watching out for:
- Cuts To Medicaid, Medicare, Supplemental Security Income (SSI) or Other Critical Programs To Pay For Tax Cuts. The Budget instructs the Senate Finance Committee and the House Ways and Means Committees to develop legislation. In addition to taxes, the Senate Finance Committee has jurisdiction over many critical programs, including Medicaid, Medicare, SSI, Temporary Assistance for Needy Families, Child Welfare Services, Maternal & Child Health, the Social Services Block Grant, the Independent Living Program, and more. Therefore, the Committee may choose to draft a bill that cuts any of these programs and this bill could be passed with only a simple majority (51 Senators, or 50 Senators plus the Vice President) in the Senate rather than the 60 votes that are usually needed.
- Loss of Revenue that Sets the Stage for Cuts to Essential Programs. The Senate Finance Committee and House Ways and Means Committees could also choose to draft bills that only contain tax cuts. As noted earlier, budget rules allow for tax cuts that could increase the federal deficit by up to $1.5 trillion. Many members of Congress who favor tax cuts also favor cuts to programs such as Medicaid and Medicare. The Arc is concerned that passing a large tax reform bill that increases the deficit will make it easy to justify spending cuts down the road.
- What Happens with Tax Breaks.
Tax Expenditures that Benefit
People with Disabilities:
- Standard deduction for people who are blind
- Architectural and Transportation Barrier Removal Deduction
- Disabled Access Credit
- Work Opportunity Tax Credit
- Impairment-Related Work Expense Deduction
- The Low-Income Housing Tax Credit
- Achieving a Better Life (ABLE) Tax Advantaged Savings Accounts
For many years, supporters of tax cuts have called for the elimination of certain tax expenditures, also called tax breaks. If certain tax breaks are eliminated, the argument goes, then tax rates can be lowered for most people. In other words, getting rid of some tax breaks can pay for the desired tax cuts. However, not all tax breaks are alike. In fact, there are numerous tax expenditures, which come in the form of credits, deductions, exclusions, exemptions, preferential rates, or deferrals of tax liability. These tax expenditures presently total $1.5 trillion. The Arc will advocate to maintain expenditures that benefit people with disabilities and their families and oppose the elimination of those that only affect the most prosperous.Additionally, The Arc will work to ensure that tax provisions that could be harmful to people with disabilities are not included. For instance, we oppose education tax credits that reduce federal revenues in order to subsidize education in private schools that are not bound by the Individuals with Disabilities Education Act (IDEA) to provide needed services.
- Basic Fairness. We expect that changes to the tax code should primarily benefit the majority of people living in the U.S., namely those with low and middle incomes. Public opinion polls show that sentiment is shared broadly. 62% of Americans actually favor increasing taxes on the wealthy, according to the most recent Wall Street Journal poll. However, this does not appear to the case in the tax reform framework, with families in the lower rungs showing only slight gains. The top 1 percent of households, however, are projected to receive 80 percent of the tax cuts by 2027. Click on the map at right to see average tax changes by income group in each state under the proposed framework.
- Mainstream Economics – Real Numbers and Real Issues. Tax cuts should be based on generally accepted economic theory and methodology. The Arc is concerned that controversial methods, such as dynamic scoring, will be used to overstate the economic benefits of enacting tax cuts. We also know from recent and historic examples that tax cuts have often not yielded promised results and have instead resulted in increased deficts and harmful programs cuts. The Kansas tax cuts provide a cautionary tale.
For more information, see: