GOP tax bill draws fire from AARP, universities
The tax bills that Republican leaders have put forward in the House and Senate have broad support from their members, conservative activists and business groups.
But other stakeholders have been sounding alarms over provisions in the legislation.
Those groups are lobbying furiously for their preferred changes, but there’s no guarantee their requests will be heard, given that GOP lawmakers are aiming to move quickly and are hoping to get legislation enacted by Christmas.
Here’s a rundown on who’s pushing back against aspects of the GOP’s tax plans.
The AARP has raised concerns about provisions in both the House and Senate bills, warning they would be harmful to older Americans.
Both bills would increase the deficit and could trigger cuts to Medicare if Congress doesn’t waive sequestration rules for federal spending. The AARP is also concerned that many seniors would see their taxes go up under the bills.
There are also provisions unique to the House and Senate bills that the group opposes. The AARP opposes the House’s push to repeal the deduction for medical expenses and the Senate’s push to repeal the ObamaCare individual mandate.
Key groups in the housing industry took issue with the tax bills even before they were released, warning that they reduce incentives for homeownership.
Both bills would substantially increase the size of the standard deduction taxpayers can take. This would reduce the number of people who take the mortgage interest deduction and concentrate those who do claim the preference at the upper end of the income scale.
The House bill would cap the mortgage interest deduction for new mortgages at the first $500,000, down from $1 million under current law, and would eliminate the deduction for second homes. It also would eliminate the deduction for state and local income and sales taxes and would cap the deduction for state and local property taxes at $10,000.
The Senate bill does not curb the mortgage deduction, but it would completely eliminate the property-tax deduction.
Municipal bond market
The bills would have a significant impact on the municipal bond market, which plays a key role in the financing of infrastructure.
A broad array of groups are involved in the market, including state and local governments that issue the bonds; nonprofit and private parties that benefit from tax-exempt debt; and individuals, banks and insurance companies that purchase the bonds.
Both bills would do away with the ability for state and local governments to sell tax-exempt “advance refunding bonds,” which allow municipalities to refinance their debt at lower interest rates and realize savings.
The House bill would also eliminate the tax-exemption for new “private activity bonds,” which are used to finance projects like facilities for nonprofit colleges and hospitals, transportation infrastructure and affordable housing.
Players in the bond market are also concerned about the bills’ treatment of the state and local tax deduction. They argue that curbing the deduction could constrain governments’ ability to have flexibility in budgeting and to issue new debt for infrastructure.
Nonprofits have several concerns with the GOP’s legislation.
The increase in the standard deduction in the House and Senate bills would reduce the number of people who would claim the itemized deduction for charitable contributions. Charities are concerned that this change could lead to a decline in charitable giving.
Additionally, the House bill would scale back the “Johnson amendment” that prevents churches and other organizations with 501(c)(3) tax-exempt status from endorsing or opposing political candidates. Under the House bill, nonprofits would be allowed to engage in political speech from 2019 to 2023 as long as the speech is in the ordinary course of business and expenses related to the speech is minimal.
Nonprofits generally oppose curbing the Johnson amendment because they think doing so would inject partisan politics into charities.
Higher education officials are concerned that colleges and their students would be hurt by a number of provisions in the legislation.
Like other nonprofits, private colleges are concerned that fewer people would take the charitable contribution deduction, and both the House and Senate bills would include an excise tax on certain university endowments.
There are also several provisions that are only in the House bill that worry colleges. These include the elimination of tax-exempt private-activity bonds, the elimination of a lifetime learning credit for part-time students and the elimination of the deduction for student loan interest payments.
Additionally, the House bill would take aim at employer-sponsored education benefits. For example, it would eliminate the tax exemption for graduate students’ tuition waivers.
Renewable energy sector
Renewable energy companies, and particularly wind-energy producers, are troubled by several provisions in the House tax bill.
Congress enacted legislation in 2015 that would phase out credits for wind and solar over the next few years.
But the House bill changes the terms of that agreement. It would undo about 25 years worth of inflation adjustments on the value of the wind credit for new projects. It also would retroactively change how projects qualify for wind and solar tax credits.
The House bill also would phase out another tax credit for utility-scale solar projects that is permanent under current law.
The Senate bill does not include the provisions that renewable-energy groups find particularly objectionable in the House bill.