Abraham P. Schwab is associate professor of philosophy at IPFW.
Rep. Jim Banks, R-3rd, has come out in support of the tax reform recently proposed in Congress, claiming it is good for middle-class Hoosiers. Whether he knows it or not, this claim is dishonest.
Middle-class Hoosiers rely on student loans to go to college. And the interest on those student loans will no longer be tax deductible.
Lots of middle-class Hoosiers have one child or more, and the proposed reform removes the personal exemption deduction. This will raise taxes on a family of three more than the proposed increase in the standard deduction will lower it.
Some middle-class Hoosiers are small business owners, and this tax plan will tax those business owners at an effective rate of 35 percent while only taxing big corporations at a rate of 20 percent.
Middle-class class Hoosiers don't make more than $500,000 a year, but, on average, that's where the proposed changes start to make a real difference in take-home pay (below $500,000 a year, the increase in take-home pay is less than 2 percent; above $500,000 a year, the increase is almost 4 percent). But that almost 2 percent increase in take-home pay, is only “on average.” And as a middle-class Hoosier myself, there's something I should tell you. If the Trump tax plan passes, my taxes will go up. The reason they'll go up is because I have a family with three kids. This tax plan will increase the taxes owed by middle-class Hoosier families.
Under the current tax structure, I get to deduct $32,850 from my taxable income. Under the new plan, I'd only be able to deduct $24,000. For Hoosier families with two children, those numbers are $28,800 (current structure) and $24,000 (proposed structure). And so lots of middle-class Hoosier families would have their taxable income go up, and do so because of a tax reform bill that Rep. Banks claims helps middle-class Hoosiers. You can see why I call the claim dishonest.
But here's the thing. I don't mind paying taxes, and I don't mind taxes being increased for good reasons. If my increased taxes meant that we were doing a better job of K-12 education or providing social services to the disabled and disadvantaged, I'd be happy to pay them. But that's not what's happening here. I'm paying more taxes, and lots of other middle-class Hoosiers will be too, so we can cut the tax rates for the extremely wealthy, do away with the estate tax (which only applies to the extremely wealthy) and cut taxes for large corporations.
I don't know about you, but if you ask me to pay more taxes to improve our schools, to feed hungry children or to provide social services to those who desperately need it, I'd do it. But this tax plan raises the tax rate for the poorest Hoosiers, raises the taxable income on lots of middle-class Hoosier families, and benefits the wealthy and large corporations.
So when Banks or anyone says that this tax plan works for middle-class Hoosiers, they're saying something that's dishonest.