The NFL would lose its ability to claim tax breaks for stadiums, colleges and universities would have to start paying taxes on massive endowments, and house “flippers” could no longer shield their income from the taxman under House Republicans’ proposed tax bill, which takes aim at a number of quirks that have developed over the years.
Republicans also settled some scores with the bill, including freeing churches from rules that prevent them from taking a stand in political elections and halting illegal immigrants’ ability to claim several major tax credits.
The changes produce tens of billions of dollars in savings a year — money that Republicans poured back into the tax code to reduce rates for lower-income Americans and to cut business taxes.
Axed from the tax code are breaks for electric car owners and big-time college donors looking to score better seats at football games. Also gone is the ability of divorcees to deduct some alimony payments.
All told, budget-cutters said, it’s a major step toward the flattening that Republicans had promised.
“Taxes should not be determined by who has access to the best accountants, lobbyists and politicians. The tax code should be simple enough that everyone — including members of Congress — is capable of filing their own returns,” said former Sen. Tom Coburn, Congress’ onetime top waste-watcher. “The House bill, while not perfect, reduces and eliminates numerous special interest and duplicates of tax breaks, and moves in the direction of a simpler code.”
Known to budget types as “broadening the tax base,” the effort to slim down the hundreds of special tax breaks that litter the code has been going on for years.
But one man’s waste is another’s treasure, and that’s just as true for the tax side of the federal budget as the spending side.
Democrats said many of the breaks Republicans propose are of great benefit to the middle class, and cutting them would end up overwhelming whatever savings families stood to see from lower tax rates.
One major change that could ding families is the elimination of the out-of-pocket medical expense deduction. They also said limiting the mortgage interest deduction to just $500,000 worth of mortgage, rather than the $1 million current cap, will hit the middle class, and said limiting deductions for state and local taxes will particularly harm those from high-tax states in the Northeast and on the West Coast.
Democrats offered up a hypothetical family of five with an income of $75,000 a year, a mortgage, student loans and a large medical bill, saying they would be socked with a $720 tax increase.
“It is clear from the outset that the Republican bill to cut taxes for the wealthy and increase deficits by as much as $1.5 trillion — while eliminating many tax preferences that middle-class families rely on — will face serious hurdles in Congress,” said Rep. Steny H. Hoyer, the second-ranking Democrat in the House.
The Actors Equity Association, a labor union for actors and stage managers, said it feared trimming itemized deductions would be a hard hit to their business, where actors rely on deductions to recoup costs for headshots, payments to agents and even transportation costs to auditions.
“Eliminating miscellaneous itemized deductions would be devastating to tens of thousands of our members by lowering their incomes and raising their taxes,” said Sandra Karas, the union’s treasurer.
Also likely to be controversial is a Republican move to lift a prohibition on church pastors explicitly getting involved in politics — which under current rules would risk their tax-exempt status.
“This is a brazen attack on the separation of church and state,” said Larry T. Decker, executive director of the Secular Coalition for America.
The Republican bill also would require taxpayers to use a valid work-authorized Social Security number to claim the refundable child tax credit, the American opportunity tax credit and the earned income tax credit.
An inspector general has calculated that billions of dollars each year are paid out to illegal immigrants through those tax credits because the IRS has concluded the law doesn’t explicitly exclude them. The Republicans’ plan would change that, saving more than $23 billion over the next decade.
That idea has been floated for years but has yet to clear Congress. Whether it can do so as part of the massive tax package remains to be seen.
Many of the other tax credits in the target zone have also been under fire for years, particularly from the likes of Mr. Coburn.
The former senator’s 2014 “Tax Decoder” report called for eliminating the new markets tax credit, and it’s gone in the Republican bill. The plan also follows Mr. Coburn’s call to curtail gamblers’ ability to deduct their losses, limits businesses’ entertainment expenses and nixes pro sports stadiums’ ability to glom onto tax-exempt bonds issued by state and local governments.
Generally used for roads, hospitals and the like, a number of communities have extended them to help out sports teams.
Axing the break would save $200 million over the next decade, according to early estimates.
While teams across all of pro sports have taken advantage of the break, the NFL’s use has come under fire this year as the league has struggled to deal with players protesting during the national anthem before games.
“Unlike the NFL, middle-class taxpayers have earned the right to take a knee when it comes to subsidizing professional athletic stadiums,” said one longtime congressional tax analyst. “At a time when sports leagues are earning … billions of dollars in revenue every year, Congress should level the playing field for taxpayers and eliminate the subsidy.”