November 22, 2017

Mass. middle class to take ‘biggest hit’ from Republican tax plan, Baker says

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Antonio Caban / State House News Service

Gov. Charlie Baker

BOSTON — The tax bill that passed the U.S. House last Thursday and is on a fast track in the U.S. Senate would benefit the wealthy at the expense of working people, Republican Gov. Charlie Baker said.

“If you really want to do something for the middle class, this is not it, because the middle class – in Massachusetts anyway – will probably take the biggest hit,” the governor told co-hosts Jim Braude and Margery Eagan Monday during his monthly appearance on WGBH. “This is just a big shift, as you point out, Jim, to the haves, at the expense in many cases of working people and the have-nots. And I don’t support that.”

Baker, who is expected to run for re-election next year, said he would be up for a discussion about lowering the nation’s corporate tax rate – which tops out at 35 percent – but he agrees with the critique offered by U.S. Sen. Elizabeth Warren, a Democrat who is running for re-election next year, about the approach Republicans are taking toward taxes in Congress.

“There’s all kinds of things in this bill that will just make life for middle-class families in Massachusetts dramatically more expensive,” Baker said. “And one of the things that Sen. Warren said about this that I thought was spot on was she said before we start taking things away from middle-class families to support tax cuts for big corporations we should be talking about what we’re going to do to make life easier for middle-class families first. And I agree completely with her on that point.”

The House voted 227 to 205 with 15 Republicans joining the Democrat caucus in opposing the measure. Two Democrats didn’t vote. A vote in the Senate, where Republicans hold a slimmer majority, could take place as soon as Nov. 30 and Republicans hope to agree to a compromise bill before the end of the year, according to Bloomberg Politics.

“Republican Senators are working very hard to get Tax Cuts and Tax Reform approved,” President Donald Trump tweeted Sunday. “Hopefully it will not be long and they do not want to disappoint the American public!”

The short timeframe cuts both ways, Baker said.

“I think the short timeline is both an advantage and a disadvantage. I think on the one hand the short timeline makes it really hard for people to get an agreement on this. They were talking about having it done by the 15th of December. But at the same time that also means things could move really quickly and not get the proper vetting that it probably deserves,” Baker said.

The corporate-led Tax Foundation called the House bill a “pro-growth reform of the U.S. tax code, which would make the code simpler and boost American competitiveness,” while the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, found that “at least 7 percent of taxpayers would pay higher taxes under the proposal in 2018, and at least 24 percent of taxpayers would pay more in 2027.”

The bill would reduce the top corporate tax rate from 35 percent to 20 percent, according to the Tax Policy Institute. Democrats and Republicans have supported a reduction in the corporate rate, and Baker said the current rate has been a hindrance on attracting business.

“Our corporate tax rate is dramatically above the corporate tax rate you see in almost any other western democracy, including most of our trading partners,” Baker said. “And we’ve actually lost companies that were going to put big manufacturing facilities here in Massachusetts – to other countries – because they said, ‘We just can’t afford to do it given your corporate tax policy.’ ”

Other aspects of the bill would take a toll on Massachusetts with its reliance on a highly educated workforce and its relatively high housing costs, Baker said.

While increasing the standard deduction, the House bill limits state and local tax deductions to $10,000 and restricts those deductions to property taxes. The mortgage-interest deduction would be capped at $500,000, under the House bill, which would eliminate deductions for tuition and student loans, according to the Tax Policy Center.

“We have the highest college graduation rate of any state in the country,” Baker said. He said, “I can’t think of a worse thing you could do to the homeowner, the value of somebody’s home, than to limit the mortgage interest deduction to something that may reflect some national standard, but doesn’t come close to reflecting what people actually pay to own a house here in the Commonwealth.”

The median sales price of a single-family home in September in Massachusetts was $362,200, according to The Warren Group.

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