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Congressional GOP Tax and Budget Plans Benefit Wealthiest at the Expense of Vulnerable Young People

President Donald Trump and Vice President Mike Pence leave Capitol Hill after meeting with lawmakers on tax policy, Thursday, Nov. 16, 2017, in Washington. Trump urged House Republicans Thursday to approve a near $1.5 trillion tax overhaul as the party prepared to drive the measure through the House. Across the Capitol, Democrats pointed to new numbers showing the Senate version of the plan would boost taxes on lower and middle-income Americans.

CREDIT: AP Photo/Evan Vucci.

House and Senate Republicans are proposing tax plans that will be a disaster for our generation’s pursuit of economic stability. Currently, the House has passed its version of a tax plan, with the Senate set to consider a similar plan and vote on it shortly after Thanksgiving. Because these tax cuts are being passed using the federal budget reconciliation process, the congressional majority is gaming the system, using arcane procedural rules to force through these massive deficit-increasing tax cuts that will likely later be used as excuses to cut programs that our generation relies on. Both versions of the tax plan will raise taxes on millions of middle-income families. The House bill includes rollbacks of tax provisions our generation relies upon, such as the student loan interest deduction and the Lifetime Learning Credit. And to pay for these tax cuts for the wealthy, the tax plans will trigger automatic cuts to essential programs like Medicaid, Meals on Wheels, and foster care support.

The majority is trying to tell our generation that these massive tax cuts for the top 1% of earners and large corporations will benefit us, but in truth they will just further rig the system against our generation and funnel wealth to the top. It is essential that our generation not allow Congress to use the complex rules of the budget process to push through a tax plan that will shortchange our generation for decades into the future. These tax and budget plans are nothing more than a smoke screen for a handout to the wealthy. Young people cannot afford the majority’s tax and budget plan.

Far from a rebalancing of wealth for the middle-class, these tax and budget plans create a transparent tool to allow the continued consolidation of wealth among America’s richest people. And they’re doing so on the backs of young people, who will see some of the deductions and tax credits that matter the most to our generation either totally eliminated or slashed if this plan succeeds. Young people are already struggling with student debt and the lasting effects of having entered the economy in the middle of a recession.  But the congressional tax and budget plans help the richest of the rich, not our generation, which is still making less than our parents did at the same age. The House tax plan offers 47 percent of its benefits to the richest 1 percent by 2027, and the Senate version provides nearly 62 percent of its benefits to the richest 1 percent by the same year. The latest analysis from the Tax Policy Center found that the House tax plan would actually raise taxes for the average family with at least one child and making under $100,000 in 2027. That year, the average filer making between $20,000 and $30,000 would get a whopping $10 tax cut, versus a $320,640 cut for the top 0.1%.

From cuts to food assistance and affordable housing programs to drastic reductions to the programs meant to lift Millennials out of the student debt crisis, the majority’s budget and tax plan wouldn’t benefit many young people like some are claiming. For example, both the House and Senate tax plans significantly increase the standard deduction, but the effect of this is limited by the elimination of personal exemptions, which taxpayers currently use to reduce their taxable income. Temporary tax cuts for some would be more than outweighed by the many cuts to programs and services the congressional budget lays out, as well as the provisions many low- and middle-income families rely on that are eliminated in the tax plans.

The budget and tax plans will also further stifle Millennial entrepreneurship, despite the majority’s claims to the contrary. Millennials have the lowest entrepreneurship rate of any generation in American history because we still struggle to attain economic stability.Together, the congressional majority’s tax and budget plans would push the American dream even further out of reach for the Millennial generation—all while pushing giant tax breaks for the top 1 percent.

Our generation is already living on the edge of economic instability, and we can’t afford to shoulder these tax cuts for the wealthy. Here’s how young people will lose out if the congressional majority’s hand-out to the wealthy passes.

The Congressional Tax Plan Is a Tax Plan for the Rich, Not for Young People

The budget paves the way for the House and Senate tax plans to give massive tax breaks to the wealthy while cutting many provisions financially vulnerable young people rely on to stay afloat.

Adoption

  • The House tax plan has, at times, completely eliminated the adoption tax credit, in a devastating attack on the LGBTQ community. Though the credit was later restored through amendment in the House plan and remains in the Senate plan, the House plan’s original scrapping of the plan shows that the majority is willing to use the adoption tax credit as a bargaining chip. The adoption credit allows parents a one-time claim of $13,750 per child. While the credit benefits many, the elimination of the adoption credit would severely hurt the LGBTQ community in particular, since gay couples are four times more likely to adopt than straight couples and are also more likely to live in poverty. This is even more damning for the Millennial generation, since 7.3 percent of Millennials identify on the LGBTQ spectrum, compared to just 4.1 percent in the general U.S. population. For these young families, eliminating the adoption credit makes adopting all the more of a financial hurdle.

Education

  • The House tax plan puts the student loan interest deduction, which helps ease the burden of exorbitant student loans for borrowers, at risk. This is an especially popular deduction—it’s used by 12 million people each year and allows borrowers to deduct up to $2,500 in paid interest from their taxable income, and the House tax plan would eliminate it. Many of these heavily impacted borrowers are Millennials: 60% of Millennial students take out loans, and the average loan amount is $30,0000. The Senate plan would leave the deduction in place.
  • Graduate teacher assistantships and other graduate tuition waivers would be considered taxable income under the House plan, pushing the cost of graduate school out of reach for anyone but the wealthy. In 2016, there were 135,130 graduate teaching assistants, or TAs. If you attended college, you probably had a TA or two along the way, since they help offset the cost of a graduate education by helping teach undergraduate classes. The tuition waivers given to these graduate TAs and other graduate fellows can be one of the only reliable ways to afford graduate school, since there are fewer federal and private scholarships and grants for graduate school than for an undergraduate education. One 2014 Council of Economic Advisers Report showed a 35 percent increase in graduate school enrollment among Millennials from young people in 1995. The tuition waivers that have made these levels of enrollment possible are crucial for Millennial graduate students who already face the burden of undergraduate student debt. The House tax plan would force TAs to pay taxes on these waivers, increasing their taxes. The Senate plan does not include this change.
  • Teachers would no longer be able to deduct the money they spend on classroom supplies. Teachers are estimated to spend $500 on average for classroom supplies per year and currently they can deduct up $250 of these costs on their taxes through the educator expense deduction. That means they still spend more money on ensuring our children have the supplies they need to learn and grow than they can deduct from their taxes, but it’s a start. The House tax plan completely eliminates this deduction, meaning there will be fewer supplies in the classrooms that need them most: districts with supplies and funding shortages. This is especially harmful to young, first-time teachers who experience even higher costs due to buying all classroom supplies for the first time. And many teachers are young: in the 2011-2012 school year, 15.3 percent of all public school teachers were under the age of 30, and 44 percent were under 40. The Senate tax plan increases this deduction to $500.

Immigration

  • The House and Senate plans discriminate against undocumented families, excluding them from accessing parts of the Child Tax Credit. Currently, families where some or all members are undocumented can claim a $1,000 refundable tax credit under the Child Tax Credit using their Individual Tax Identification Number (ITIN), which is the identification undocumented people receive since they do not have Social Security Numbers (SSNs). Both the House and Senate tax plans would require a child’s SSN to access the refundable portion of the Child Tax Credit, thereby intentionally excluding some undocumented immigrant families from significant portions of the credit.

The Majority’s Budget Plans Would Make Devastating Cuts to Essential Services

Alongside the huge tax cuts for the top 1 percent despite unparalleled income inequality, the majority’s budget proposes cutting and eliminating some of the most important programs and services for young people.

Higher Education  

  • Pell grants—a critical tool for low-income students accessing higher education—would be slashed in Trump’s and the majority’s budgets. Both President Trump and the Republican-controlled Congress seek to freeze the maximum Pell grant award and slash the program’s surplus. This action would compromise access to higher education—an essential pathway to mobility—for millions of Millennials, who form 77.1 percent of the 7.6 million Pell grant recipients. Trump’s budget would also phase out subsidized loans, which 6 million students—many of them low-income—used in 2015-2016 to cover the cost of college. Millennials would be forced to bear much of the $27 billion shift in costs this would place on students.
  • Trump’s budget would make paying off student loans that much harder for low- and middle-income borrowers. President Trump proposes eliminating the Public Service Loan Forgiveness (PSLF) program, which at least 500,000 borrowers have taken advantage of to work in public service fields. Similarly, the Trump budget would prove disastrous for many student loan borrowers who rely on income-driven repayment (IDR) programs because it proposes increasing the monthly payment rate.

Health care

  • Trump and the majority’s budgets would devastate Medicare and Medicaid, putting Millennial lives at risk. In addition to their attempts to repeal the Affordable Care Act, which led to a 45 percent drop in the number of uninsured Millennials, both President Trump and Congress have proposed dismantling Medicaid and cutting the program by hundreds of billions of dollars over ten years. All of this would threaten health benefits for the millions of Millennials who are insured through Medicaid, including the 3.8 million who gained coverage through the expansion of state Medicaid programs to low-income adults.

Food assistance

  • To finance tax cuts for the rich, Trump’s budget cuts funding to prevent people from going hungry. President Trump’s budget would slash the Supplemental Nutrition Assistance Program (SNAP)—which helps about 10 million Millennials put food on the table in a given month—by a full $193 billion over the next decade. The House budget would also cut SNAP by $150 billion over 10 years, instituting harsh time limits for certain beneficiaries and fundamentally restructuring how it’s funded. For Millennials, many of whom already face food insecurity, these cuts threaten to exacerbate hunger and hardship.

Affordable housing

  • With waitlists for affordable housing already taking years to get off of, Trump and the majority’s plan would further decimate affordable housing options for young people. Affordable housing programs help keep young people on their feet, allowing them to go to school or work and the ability to return to a roof over their head at night. In 2010, housing subsidies kept five percent of those aged 24 and under and 42 percent of those 25 to 49 out of poverty. President Trump’s budget and the House budget propose deep cuts to affordable housing programs. President Trump’s budget seeks to eliminate several programs that encourage investment and stabilization in low-income communities, including the Housing Trust Fund, the Community Development Block Grant, the HOME Investment Partnership Program, Choice Neighborhoods, and the Self-Help Homeownership Opportunity Program.

Energy assistance

  • Trump’s budget would end a program to shield people from dangerous temperatures. The Low-Income Home Energy Assistance Program allows 6.7 million households to heat their homes in the winter and cool them in the summer, specifically targeting low-income households with young children, which includes many Millennial households. However, President Trump’s budget axes the program in its entirety, exposing households to hazardous temperatures at home.

Conclusion

The majority argues these tax cuts for millionaires, billionaires, and businesses will eventually trickle down to the middle class, justifying their slash-and-burn budget. But history and research have shown us that trickle-down economics never actually trickles down, and the wealth simply becomes more and more concentrated among the top. If Congress actually wanted to create a plan to help the middle class, why not skip the trickle-down step and rely solely instead on tax tools proven to boost the middle class, like expanding the Earned Income Tax Credit and the Child Tax Credit and keeping critical programs like Medicare and Medicaid in place? Millennials distrust institutions at unprecedented levels—and it’s no wonder why when pieces of legislation like these pose as tools to help low- and middle-income Americans but are actually only interested in one thing: lining the pockets of America’s wealthiest. Millennials see right through the congressional GOP’s tax and budget plans, which will do nothing but hurt our generation.

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