Heitkamp Explains how Republican Tax Reform Bill will Hurt North Dakotans

Press Release

Date: Dec. 18, 2017
Location: Washington, DC
Issues: Taxes

U.S. Senator Heidi Heitkamp today explained how the House-Senate Republican tax reform bill will impact North Dakotans by increasing the debt by nearly $1.5 trillion, raising costs for most middle income families in the long-term, and not growing the economy or creating jobs in the way Republicans say it will.

Joining Heitkamp were a local tax attorney, small business owner, senior citizen, farmer, and the president of the North Dakota Building and Construction Trades Council. Each explained how the final bill will make the tax code more complex, disadvantage local small businesses and workers, hurt seniors and middle income families, and put at risk farm programs that producers rely on.

"It's Congress' job to put our country on a strong path forward," said Heitkamp, North Dakota's former tax commissioner. "Unfortunately, this bill does the opposite. It will put nearly $1.5 trillion on the country's credit card, passing those costs on to our children and grandchildren. And it will increase costs for most North Dakotans in the long-term, while corporations and the wealthy reap permanent benefits. I've long said I wanted to work on tax reform that supports workers, families, and retirees across North Dakota, but this bill was hastily crafted and pushed through by one party. That produced bad results that don't serve North Dakota or rural America."

Heitkamp discussed how the final bill, released last Friday evening, will explode the country's debt, adding nearly $1.5 trillion on the nation's credit card -- and that's before accounting for various budget gimmicks -- forcing those huge costs onto future generations. On top of that, academics and conservative experts have concluded that under the bill, the country's debt will grow much faster than the economy. And, the Republican tax reform bill won't grow the economy or create jobs in the way Republicans say it will, as many large companies have said they will pass most tax savings on to shareholders, and not use the majority of the tax cuts to create jobs or boost wages.

The Republican bill will also specifically impact many North Dakotans:

Middle income families: The bill provides permanent tax cuts to corporations and large tax cuts for the wealthy, while middle income families lose out in the long-term because the relatively modest tax cuts they initially receive will expire after 2025. According to the Joint Committee on Taxation, the net effect of all individual provisions in the tax reform bill will raise taxes on individuals by a total of $83 billion in 2027. On the other hand, businesses will get a $49.4 billion tax cut that same year.

Small businesses: The bill will widen the gap between large and small businesses, just as it will between wealthy individuals and middle income individuals. According to a group of 13 tax law experts from December 7, the bill will essentially punish smaller businesses that can't afford to pay high priced tax attorneys and accountants to exploit loopholes and glitches in the rules. The largest loopholes enable the wealthy to declare their income as business income to benefit from the new lower corporate tax rates. And because of the loopholes, the bill enables businesses to effectively hide income overseas and it could lead to companies shifting American jobs abroad.

Seniors: According to AARP, the bill will provide a large tax cut for corporations while raising taxes and health care premiums for millions of older Americans. It will also drastically increase the nation's debt by nearly $1.5 trillion, which could lead to $400 billion in cuts to Medicare over 10 years, and slash other programs that support seniors.

Farmers and ranchers: Middle income families across rural America, including many farmers, will lose out under the bill as the temporary, relatively modest tax decreases they receive will disappear after 2025, while the wealthy and corporations will reap permanent rewards. Additionally, the huge cost of the tax reform bill could require Congress to pay for it by reducing spending elsewhere. Such action could lead to $20 billion in cuts to vital agriculture programs and hinder the negotiation of the 2018 Farm Bill. The bill also adds complexity and uncertainty for farmers because the full expensing provisions will expire in 2022 and the favored pass through rates will expire by 2025.

Millennials: The structure of the tax bill will be particularly devastating for young men and women entering the workforce who will face a nearly $1.5 trillion bill in the next 10 years, just as they are entering their prime working years. Although millennials will be paying for these tax cuts, they won't see much in terms of tax reductions because these cuts are geared toward higher earning workers who are more developed in their careers. And by the time most millennials will be entering into their prime earning years, the tax cuts will be completely phased out. At the same time, millennials will face higher tax brackets because the tax bill will permanently index tax brackets to a lower rate of inflation, resulting in more middle class income going into higher brackets over time. Finally, provisions in this tax bill will do little to address the myriad of challenges young Americans face, from higher education and housing costs to a lack of retirement planning.

Heitkamp has long said she wants to work with Republicans and Democrats on tax reform that supports workers, families, and retirees, while growing the economy and remaining fiscally responsible. In September and October, she held four listening sessions across the state to get feedback from North Dakotans about what they wanted to see in a tax reform bill. She joined President Trump during his visit to North Dakota on tax reform. She also met with him and a bipartisan group of senators at the White House in September on the issue. And she joined a dinner with a bipartisan group of senators at the home of Jared Kushner and Ivanka Trump in October to discuss tax reform.