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Don’t believe the tax-reform hype

Secretary of the Treasury Steven Mnuchin heads a

Secretary of the Treasury Steven Mnuchin heads a news conference on tax reform last week in Washington. Credit: Getty Images / Alex Wong

“It will increase taxes on millions of middle class families; it will do nothing to reduce the deficit and, in fact, will make it more of a problem; and it will give special tax breaks to the wealthy and powerful.”

What the critics are saying about tax reform in 2017?

Nah, it’s what the critics were saying about tax reform in 1986.

And I had a special vantage point for hearing those words back then, and they sound so familiar to what’s being said today. In 1986, I had the good fortune to be the legislative director and tax staffer for then-Sen. Carl Levin (D-Mich.), who took the bold and politically risky position of being against the tax reform bill that Congress voted on that year.

Levin opposed the Tax Reform Act of 1986 for several reasons, but central to his criticism was that regardless of the “no middle class tax increase assurances” that its proponents on both sides of the aisle and on both ends of Pennsylvania Avenue were giving, it was going to end up being a tax increase for millions of middle class families. Levin was able to ferret this information out as a result of his persistent requests to the Congress’ Joint Committee on Taxation, which is House and Senate tax-writing committees’ numbers cruncher. What its analysis showed was that about 13 million middle class taxpayers would receive tax increases even though the legislation was advertised as tax relief for average Americans.

True, this report came with the caveat, which would apply to the analyses of this year’s tax reform effort as well: When a bill has as many interacting provisions as does tax legislation, then projections are uncertain. But as Levin pointed out at the time, “If the Committee cannot confidently quantify ‘losers,’ that means it cannot confidently quantify ‘winners,’ either.” So, now, as then, the soothing assurances to many of Long Island’s middle class families by the bill’s supporters that tax reform will make them better off may be as empty as a promise that “the check’s in the mail.”

And this year, we’re already seeing how these assurances lasted only a little longer than a snow cone on a 95-degree, mid-July day. Senate Majority Leader Mitch McConnell’s promise that “nobody in the middle class is going to get a tax increase” and House Speaker Paul Ryan’s that “everybody gets a tax cut” melted down even before the debate on these bills has had time to really heat up. In his “clarification,” McConnell said, “You can’t guarantee that absolutely no one sees a tax increase.” Ryan’s too cute nuance was, “At every income level, there’s a tax cut for the average family.”

The reason why McConnell and Ryan had to risk giving us verbal whiplash is that several analyses already project that many middle class families, especially those on Long Island, will receive tax increases from either the House or Senate tax reform plans. Restrictions or eliminations of the deductions for mortgage interest, state income taxes, property taxes, student loans, and the personal exemption will more than offset for some middle class families the benefits that they might see from lower tax rates or an increase in the standard deduction.

The Tax Reform Act of 1986 passed Congress by wide margins. It’s still praised by many for making the tax code fairer, although others see it as having played a key role in the real estate downturn of the late 1980s. But in casting his nay vote on Sept. 27, Levin ended off with words that members of Long Island’s congressional delegation would do well to ponder now: “I cannot explain to anyone why the noble goals of tax reform had to come at this unacceptably high price . . . We Americans pride ourselves on our common sense — on our shrewdness. But in this bill, we have not paid less to get more. We have ended up paying more to get less.”

For 12 of his 17 years on Capitol Hill, Chuck Cutolo was a legislative director for then-Sen. Carl Levin (D-Mich).