WASHINGTON — Tax policy is not a simple matter. It almost never has been and may not ever be.
Still, Congress is trying to simplify the tax code to deliver on President Donald Trump's campaign promise to cut taxes for the middle class.
Working under the "Unified Tax Reform Framework" introduced by congressional leaders Sept. 27, efforts are underway to reduce the number of tax brackets, resulting in a tax cut for most Americans, and to incorporate numerous other provisions that some observers say primarily benefit the country's top wage earners and largest corporations.
Some Catholic observers fear that large cuts in health care and other public services will follow as tax revenues fall under the tax reform plan was expected to be unveiled Nov. 1, but it was delayed. Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee, was expected to unveil the plan Nov. 2.
Their concerns are fueled by projections of lost tax revenues and the reaction of conservative lawmakers who may try to lessen the impact on the federal debt by spending cuts on social services.
The Senate Finance Committee expects a $1.5 trillion reduction in tax revenues under the framework by 2027. A more pessimistic outlook comes from the nonpartisan Tax Policy Center, which estimated that the potential impact of proposals under the framework would reduce revenue by $2.4 trillion over the same period.
Three guiding principles on tax policy are offered in the U.S. Catholic bishop's 1986 pastoral letter, "Economic Justice for All." Paragraph 202 outlines key provisions, saying tax policy should be "continually evaluated in terms of its impact on the poor."
The document stated the tax system should raise "adequate revenues" to pay for society's needs, be progressive in nature so that people with higher incomes pay higher tax rates, and exempt families living below the federal poverty line from paying income taxes.
Any shortfall that comes about because of tax reform worries Presentation Sister Richelle Friedman, director of public policy at the Coalition on Human Needs.
"It's very, very clear what we're doing here. We're doing tax cuts for very wealthy individuals and corporations, many of them which pay little or nothing to begin with. In order to do that we're looking at ways to cut programs to pay for tax cuts," Sister Friedman said.
Cutting programs that primarily benefit poor people fails to adhere to moral principles on tax policy long-espoused in Catholic social teaching and the U.S. bishops, she said.
Sister Friedman expressed particular concern for changes in how low-income families will be able to take advantage of the child tax credit and the Earned Income Tax Credit. Both programs have proven helpful in boosting family incomes, lifting many out of poverty.
Questions about tax reform revolve around who benefits most.
The Tax Policy Center analysis found that the 50 percent of the total tax benefit will go to the top 1 percent of taxpayers, those with incomes of more than $730,000 annually. Their after-tax income would increase an average of 8.5 percent. The bottom 95 percent of taxpayers would see average after-tax incomes increase between 0.5 percent and 1.2 percent.
Taxpayers earning between $150,000 and $300,000 would see a slight tax increase on average because they would lose most of the deductions currently allowed, according to the study.
For businesses, tax liability would be significantly reduced under the framework. Tax cut proponents have argued that such cuts will help businesses become more competitive in the world market, giving them the opportunity to expand — and that means more jobs and higher wages for the country's workforce and, overall, higher tax revenues.
Jesuit Father Fred Kammer, director of the Jesuit Social Research Institute at Loyola University New Orleans, said efforts in the past to reduce taxes for corporations and people in the highest income brackets have been reversed. He recalled that the 1981 tax cuts under President Ronald Reagan's administration were reversed within five years after U.S. budget deficits soared and human services experienced deep roll backs. Rather than invest in expansion then, corporations bankrolled the extra revenues.
The same has traditionally held true for individuals, he added.
"When you give tax breaks to wealthy people, it doesn't affect their spending. They save it and invest it. When you give tax breaks to low- and middle-income people they spend it and they spur economic growth."