By Al Norman
Elder rights groups are warning that the federal Tax Cuts and Jobs Act (HR 1) will be financed by gutting entitlement programs like Social Security and Medicare.
“This is a nasty, two-step strategy,” Senator Chuck Schumer, Demoractic Majority Leader, told the New York Times. “If this bill passes, you can bet the Republicans will immediately sharpen the knives for middle-class benefits.”
The Congressional Budget Office says a 2010 law requires cuts to Medicare of as much as $25 billion next year. The law says that any new legislation that adds to the federal deficit must be paid for with spending cuts. If that does not happen, automatic cuts will be made to Medicare which could reach a half trillion dollars over 10 years.
The National Council on Aging (NCOA) is worried about how the new federal tax bill will impact the federal deficit. It includes $5.5 trillion in tax cuts, yet it pays for only a portion of them, largely by increasing other taxes. An estimated $1.5 trillion in tax cuts over 10 years are not paid for. A large increase in the deficit, NCOA says, will result in major cuts to Medicare, Medicaid, and discretionary programs like the Older Americans Act – and may even be used as an excuse to cut Social Security.
NCOA also expressed concerns with the proposed repeal of the Medical Expense Deduction, which allows taxpayers to deduct qualifying expenses above 10 percent of their adjusted gross income. Almost five million taxpayers aged 65 and over use the deduction to reduce potentially bankrupting out-of-pocket medical expenses, such as paying for nursing home care.
The tax cut bill will also reduce the number of income tax brackets from seven to four – 12, 25, 35 and 39.6 percent – reducing federal revenues by $1.09 trillion over 10 years. It will double standard deductions from $6,350 to $12,000 for individuals, and $12,700 to $24,000 for couples – reducing federal revenues by $921 billion over 10 years. The proposal will also reduce corporate tax rates from 35 to 20 percent – cutting revenues by $1.46 trillion over 10 years. The bill will also repeal the current $4,050 per-household-member personal exemptions – increasing revenues by $1.09 trillion over 10 years. The estate tax exemption, which largely affects only the very wealthy, will double from $5.5 million to $11 million and will be eliminated entirely by 2024 – reducing federal revenues by $172 billion over 10 years. The Alternative Minimum Tax will be repealed – reducing revenues by $696 billion over 10 years. The home mortgage interest deductions will be capped at $500,000 – half of the current limit of $1 million. The legislation will also limit deductions for state and local taxes by only allowing property tax deductions up to $10,000. An estimated 45 percent of the tax cuts in 2027 would go to households with incomes above $500,000 (fewer than 1 percent of filers).
The Center on Budget and Policy Priorities (CBPP) says that the tax plan will hurt older people: first by enacting costly tax cuts that are heavily skewed in favor of wealthy households and profitable corporations, and second, paying for them later through program cuts mostly affecting low- and middle-income families.
“Most of the elderly would lose more from the program cuts than they would gain from the tax cuts,” the CBPP said. “Worse, when Congress turned its attention to paying for those tax cuts, elderly people could lose health care, housing and nutritional assistance, and educational services that they need to thrive now and in the future. The wealthy win large tax cuts, and everyone else pays for it with lost benefits. The elderly are likely to face the heaviest losses.”
Al Norman is the executive director of Mass Home Care. He can be reached at 978-502-3794 or [email protected].