Expert Commentary from Dean Michael The Tax Doctor about the Huge Chasm Between Republicans and Democrats When It Comes to Tax Legislation

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Is the Middle Class being ignored again?

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Once again it looks like the middle class will get the short end of the stick.

Recently, a number of Democrats reached across the aisle to their Republican counterparts in an attempt to work together regarding tax reform. However, they stated if Republicans want to work together to create a workable piece of bipartisan legislation, there were three important conditions they would have to agree to. First, the legislation would need to be drawn up via the regular committee process. Second, the new legislation must cut income taxes for middle-class families without doing the same for those in the high-income bracket. Finally, any changes to the tax laws must not reduce the current amount of tax revenue collected under current legislation.

Extending an Olive Branch
According to the Tax Policy Center, the letter sent out by the Democrats while intended to be a type of olive branch, managed at the same time to show everyone just how far apart the goals of both parties are with regard to making changes to the tax system. Unfortunately, the tax bill wanted by the Republicans is very different not only in terms of the process but also in substance.

This letter was organized by Minority Leader Chuck Schumer (D-NY), and Ron Wyden (D-OR) the top Finance Committee Democrat. Signed by 45 of the party's 48, only three Democrats did not sign the letter. These individuals were Joe Donnelly (D-IN), Heidi Heitkamp (D-ND), and Joe Manchin (D-WV).

The Middle Class Ignored
The problem with what is going on in the Senate, regardless of whether you are a fan of former President Obama or current President Trump and their respective parties, is that neither party seems to truly care about the middle class according to a report from the Associated Press. Even though the middle class is the backbone of this country and has always suffered under the heaviest burden of taxes, neither of the proposed tax plans seems to have their best interests at heart.

To many, it appears our government is more concerned with either end of the income spectrum. The Obama plan focused on simply raising taxes on the "rich." But if you look at the records, they also managed to incorporate several new taxes that specifically targeted those making less than $250,000 per year. This included taxes such as the Flexible Spending Account Tax, the High Medical Bills Tax, and the Medicine Cabinet Tax, all of which hit the middle class the hardest.

Trump's Plan Is No Better, in Fact, It Might Be Worse
At the same time, according to Vox, the current single page plan proposed by the Trump administration under Steven Mnuchin makes it very clear the nation's top 1% along with major corporations will see one of the largest tax cuts in American history. At the same time, the proposal released on May 23rd, 2017 shows that the middle class can expect to see a significant increase in their taxes along with losing access to important services such as Medicaid, Medicare, and Social Security.

Many of these increases would come in the form of cuts in deductions for the taxpayer, their spouse, and any dependents they may have. While this might reduce the cost of the Trump Tax plan by approximately $2 billion over the course of the next ten years, it will have a significant impact on the middle class, leaving them unable to survive without having to work more and spend less time with their families.

In the End
In the end, it seems as though it doesn't matter which party is in power, the middle class stands to lose when it comes to taxes. Each party may claim to have the best interests of the middle class at heart, but when you get right down to it, each is focused on their own needs rather than those of the largest part of their constituency, the middle class.
The real problem is that even if Republicans felt inclined to work with Democrats, the result would require far more than simply tinkering with the existing plans. No matter what direction this goes, the end result is sure to be regressive and extremely costly. While both sides could look for an amicable solution that falls somewhere in the middle, the problem remains that the current chasm is so wide that one side, the other, or even both sides might have no choice but to abandon their key principles if they ever want to reach a deal that works for every taxpayer in the country.

Written by:
Dean Michael
CEO/Tax Doctor
Tax Help MD

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