Column: What do Republicans have for upkeep? And different unusual questions that the GOP tax legislation raises
What does the Republican Party have against a divorce?
That question is one of the provisions of the tax bill presented by Republicans to the House of Representatives last week. It is one of many regulations that will put pressure on middle-income taxpayers, and there is little reason to produce other than a few more ducats to be given to the wealthy who are the patrons of the GOP. The impact phase of moving the tax law towards a vote – call it the detailing process – begins Monday.
We’ll cover a few details here. But let’s start with the upkeep.
Under current law, alimony paid is normally deducted from the payer’s income and declared as income by the recipient. The tax bill would require it to be paid in after-tax dollars – in other words, the payer would lose the deduction even though the maintenance for the recipient would likely be tax-free.
It has been known for 75 years that a divorced couple faces financial hardships. … The GOP will simply ignore these burdens.
Tax Attorney Stuart Levine
The withdrawal cost the Treasury approximately $ 950 million in 2015, the last available year. Mother Jones’ Kevin Drum notes that that portion of the federal budget is so small that it doesn’t even qualify as “a nickel under the bolsters to pay for their corporate tax cuts.” Drum points us to careful analysis by Stuart Levine, a Baltimore tax attorney who writes on the Reality-Based Community blog.
Levine notes that the justification given by the GOP for the change is inconsistent. The Joint Tax Committee officials state that the provision aims to bring the tax treatment of alimony in line with the Supreme Court ruling in the Gould v Gould case. There the Supreme Court ruled that the recipient’s maintenance is not taxable income.
A couple of issues with how Levine points out. One is that Gould was narrated against Gould in 1917. Another is that it was reversed by Congress – in 1942, that is, 75 years ago. Since then, Congress has largely stayed away from further tinkering with marital finances. Until now.
Republicans on the Ways and Means Committee further denigrate the current treatment of alimony as “effectively a ‘divorce allowance’ … in that a divorced couple can often get a better tax result on payments between them than a married couple”.
As Levine writes, “In other words, for 75 years it has been recognized that a divorced couple has financial burdens greater than that of a married couple, and the GOP will simply ignore those financial burdens.”
It is tempting to think of alimony as a moral attack on divorce, but that would be a pretty narrow definition of morality. It is quite common in American society that sometimes forcing a couple to stay together is more harmful to the family, including children, than to allow them to separate. That is why divorce law has been systematically liberalized since the 1950s.
What is really at work here is the GOP’s search for money for the rich as tax cuts. In almost all cases, the maintenance recipient will have a lower marginal tax rate than the payer. (Despite the changes in the family structure over the past few decades, men are usually still the debtors and women are the recipients.) The recipient pays less tax on the maintenance received than the payer.
This is how it would work, based on the 2016 IRS tax tables. Assume the payer’s annual income is $ 98,000 and the recipient is nothing but $ 30,000 in alimony. Under current law, the payer would have a tax bill of $ 13,015 based on an income of $ 68,000 minus child support. The beneficiary would pay $ 4,183 in tax on alimony. Combined Tax: $ 17,198.
Force the payer to pay all of the tax based on an income of $ 98,000 and the tax bill is $ 20,750. The change brings in $ 3,552 to fund that tax cut for the 1%.
Levine cites a colleague’s observation that “this loss will occur at the precise moment when the former couple is economically weakest. This is such a terrible public order that it is hard to believe that the people who proposed it understand the consequences of their proposals. ”Well, the applicants clearly understand the consequences on the bottom line: they acknowledge that the Change would generate $ 8.3 billion in revenue over 10 years.
In the best case scenario, the change will make maintenance negotiations more difficult in the event of a divorce. Worse, it is almost certain to come out of the recipient’s skin. “Simply put, the alimony that usually goes to a wife in a divorce becomes more expensive,” says Levine, who describes the provision as part of the GOP’s fight against women. He’s right.
Alimony is just one of many that analysts are trying to figure out what the GOP is up to. I have covered several of these little atrocities, as I have termed them – the waiver of deductions for teachers’ out-of-pocket courseware, student loan interest, medical expenses, and adoption.
Here are a few more:
Deduction for employers providing access to disabled workers: Current law allows small businesses a partial tax reduction on the cost of housing disabled workers, including removing physical barriers, buying equipment, or even hiring interpreters or providing audio equipment for people with hearing problems. The tax plan kills that deduction. The company must have gross income of $ 1 million or less, or no more than 30 employees. We keep hearing from the GOP echo chamber that small businesses are the lifeblood of the US economy. However, this provision has a direct impact on the incomes of these companies and the well-being of disabled workers. That change would make a whopping $ 300 million in 10 years.
Flexible spending accounts for people in need of care: The tax bill would abolish flexible spending accounts for people in need of care. These are usually applied to childcare costs or dealing with family members who are “physically or mentally unable to look after themselves”. Current law allows families to deposit up to $ 5,000 pre-tax in such accounts. This repeal would put $ 6.5 billion in the pockets of the rich over 10 years. Republicans on the House Ways and Means Committee claim the tax credit would no longer be required because tax law provides for other childcare credits.
Tuition fees at universities and graduate schools: The tax law would abolish a tax break for doctoral students who are employed as teaching assistants at universities, on terms that include a waiver of their tuition fees. The tax law would treat the waived tuition fees as income for the students – who are obviously among the lowest-income members of society. The repeal would also cover tuition reductions for the children of faculty and staff – a benefit colleges and universities take advantage of to hire faculty at lower salaries than they would otherwise have to pay.
The tax bill would also repeal a tax break that helps ordinary families pay for their higher education. Interest on U.S. savings bonds issued after 1989 is tax-free when used to pay tuition and college fees as long as family income is less than $ 147,250 (for couples). The tax assessment eliminates the break. Combined with the cancellation of the student loan interest deduction we have discussed here, those repayments would put more than $ 45 billion in the pockets of the rich, at the expense of university students and teachers.
Orphan Drugs: The tax plan would remove a tax credit for developing drugs for rare diseases, usually defined as conditions that affect fewer than 200,000 people. The provision has been in place since 1983, but is controversial. It is prone to being tricked by large pharmaceutical companies. However, the National Organization for Orphan Diseases says removing the incentive could result in 33% fewer orphan drugs coming to market.
The Food and Drug Administration is closely examining the orphan drug program and the Government Accountability Office is considering an investigation. However, there is no indication that these considerations played a role in the proposed tax credit waiver. What mattered was the price: the repeal would provide $ 54 billion over 10 years to fund the tax cut for the rich.
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