ICYMI: Donovan Publishes Op-Ed on Needed Fixes to Tax Reform Proposals
Washington, DC – December 4, 2017…. Congressman Dan Donovan (NY-11) published the below op-ed in the Staten Island Advance. The piece includes an analysis of the current tax reform proposals and what needs to be changed to deliver true tax relief for all middle-class, taxpaying Americans.
Excerpts from the op-ed:
It's not easy being a middle class family in New York. You work hard, pay your taxes, maybe put a few dollars aside for your children's college, but every time you think you can inch ahead, life throws you a curveball.
As the son of a longshoreman and factory worker, I learned that struggle at a young age. My parents were forced to make tough spending choices every day. I take those experiences, and the stories of so many similar families, with me to Washington, and that is why I am fighting so hard for a tax bill that will deliver real relief for the residents of Staten Island and South Brooklyn.
The current bill that was voted on in the House recently would do the opposite, raising taxes on our community to pay for tax cuts in other parts of the country. The Institute for Taxation and Economic Policy released a report showing that New York, New Jersey, California, and Maryland would pay an extra $16.7 billion in taxes, while the other 46 states would see a tax break worth more than $100 billion under this proposed legislation. That is why I voted NO, because it is unfair to you and your family!
Because of the huge advantage provided by itemizing under current law, around 90 percent of middle income families in our community (a family of four earning between $100,000 and $200,000) itemize their deductions.
So what does that mean for an average family of four living on Staten Island? Imagine a firefighter married to a nurse, a school teacher married to a construction worker, and a police officer married to a secretary. Each family has two children and makes a combined income of $175,000 per year.
Under current tax law, everybody in a household gets a $4,050 personal exemption, so a family of four deducts $16,200 off their taxable income right off the bat. At that salary, they'd pay about $15,000 in state and local income taxes, which they can also write off. And let's assume their home is worth $650,000 and they're about 10 years into a $520,000 mortgage, so they have an additional deduction of about $18,000 in mortgage interest.
Add in $6,000 for deductible property taxes, plus $3,500 in other miscellaneous deductions (e.g., student loan interest, medical expenses, child care expenses, charitable contributions) and the total itemized deduction is $42,500. Including the personal exemption I mentioned earlier, that family of four reduces their taxable income by $58,700, meaning they only pay taxes on $116,300. Based on the existing tax code, this typical family would itemize its deductions and pay about $20,300 in federal income tax.
Now let's take a look at how that family would be impacted by the tax reform plan that passed the House of Representatives last week. It's a much simpler calculation because most of the above itemized deductions would be eliminated.
The plan does away with the personal exemption entirely, and it prohibits filers from writing off their state and local income tax. So this family could only itemize its $6,000 property tax and $18,000 mortgage interest. Since this equals the new $24,000 standard deduction, the family would probably take the simpler route and just claim the standard deduction. That puts their taxable income at $151,000, which, using the new, lower, brackets, comes out to $26,050 owed to the federal government.
However, this family would benefit from the new, higher child tax credit (which phases out at a much higher income) of $1,600 per child, plus a $300 credit for each parent, so their total tax burden would be $22,250. Compared to what they're paying now ($20,300), that's a tax hike of $1,950 for a family of four earning $175,000 in an average home, or $160 per month.
To add insult to injury, the bill cuts taxes on private jet owners and provides a special tax credit for champagne producers and importers. That's insane. And it's why I voted against the bill in its current form and have been fighting tirelessly to get a better bill that delivers tax relief -- not increases -- for New Yorkers…
…I commend President Trump for taking on tax reform and restoring the American economy. The president set his priorities and it's up to Congress to deliver him a good bill that meets those goals. The solution I and my Republican colleagues from New York proposed would keep the state and local tax deduction for those making $400,000 or less per year and phase it out for truly high income earners. This would result in a tax cut for ALL middle-class, taxpaying Americans.
I'll continue pushing to make it happen. The fight isn't over, and truthfully, I don't care how many feathers I have to ruffle to try and stop this tax hike. You and your family are my only priority in Congress