Happy New Fights: Battle over the budget will grow as deficit spending explodes

 

Screen Shot 2017-12-24 at 8.58.12 PM
President Donald J. Trump delivers remarks at the White House on the tax reform legislation. (Official White House photo by Stephanie Chasez)

Mark Trahant / Trahant Reports

The first year of the Trump era has been challenging: The administration and the Congress sought to repeal the Affordable Care Act and radically redesign one of the nation’s best public health insurance programs, Medicaid. That plan failed.  And I’ll come back to that point shortly.

But first: Congress did move forward with its other agenda item, to rewrite the tax code and reduce the amount of federal income taxes that most pay. And the two key words here are income tax. That’s important because most people pay more in payroll taxes than income taxes. The Joint Committee on Taxation looked at the numbers a couple of years ago and found that 80 million tax filers that earn $40,000 or less pay no federal income tax and many even get cash refunds. But we pay $121 billion in Social Security and Medicare payroll taxes. Even those families who make between $40,000 and $75,000-pay three times as much in payroll tax as in federal income tax—nearly $190 billion of the former and just $64 billion of the latter. The total income for a household has to exceed $100,000 more before income tax is a bigger cost than payroll taxes. Bottom line: Wealthy people get a tax cut.

The big winner in the tax bill, however, is business. The new law sharply drops what corporations and small business pay in federal income taxes. The Tax Policy Center calculates that savings at nearly three times as much for business owners in 2019 as for people who whose primary source of income is wages or salaries. The Tax Policy Center found that all households would get an average 2019 tax cut of about 1.6 percent of after-tax income (roughly $1,200). Those who make most of their income from wages would get a tax cut of about 1.5 percent of after-tax income, or about $1,200. But owners of pass-through businesses such as partnerships and sole proprietorships would get an average tax cut of 4.3 percent of their after-tax income (about $4,300).

It’s important to note that corporate taxes have gone up in recent years, but are not at historically high levels (as shown in this Tax Policy Center chart.) During the 1950s corporate taxes were 6 percent of the Gross Domestic Product.

 

corporate_gdp

One way Congress looks at business taxes is to account for “pass through” taxes. So if you earn money as, say, a freelancer. Then you can deduct expenses on another form. This process could be useful to a few people in Indian Country. If you do work that could be considered a “business” (and make enough to pay income taxes) make sure that you are set up as a business because you will pay less tax under this new law.

So lots of people — and especially companies — will pay less in federal taxes. And the federal treasury will have a lot less funding as a result.

“The tax bill will provide a bonanza to the most well-off Americans and profitable corporations, even as it leads millions of Americans to lose health coverage and ultimately raises taxes on many low- and middle-income Americans,” writes Robert Greenstein of the Center for Budget and Policy Priorities. “And, faced with criticism that the tax bill will swell budget deficits, President Trump and House Republican leaders have made clear that one of their top priorities for 2018 will be to use the fast-track budget “reconciliation” process — the same process they used to pass the tax bill — to cut assistance programs that aid millions of struggling families, to try again to repeal the Affordable Care Act (ACA) and cut Medicaid, or both.”

The process of reconciliation means that budget cuts next year could pass the Senate with only 50 votes — all Republicans. That’s awful. But the good news is that even might be a huge hurdle for Republican leaders. The problem is that the Republican majority is not sure what it wants. Some members want more money for the military and are willing to work with Democrats (who want money for domestic programs to make that so). Others want stark budget cuts; sequester times X. Others just want to find a deal of some kind, something that governs the country.

We already know these divisions are deep because the Republican-only majority has been unable to pass a budget for 2018 (which started October 1). The government is running on a temporary spending bill that expires Jan. 19. Right now the House is working off a funding level that would significantly increase defense spending and slight reduce domestic programs. The Senate is basically working off last year’s budget.

That’s all well and good for now but remember the pressure will increase to balance the budget as the cost of the tax legislation is calculated. As the National Congress of American Indians said: “The current tax reform legislation amounts to little more than a $1.5 trillion increase in the federal deficit over the next ten years. This deficit increase will inevitably create pressure to cut federal programs and services that are extremely important to tribal communities. Deficit-financed tax cuts that lead to austerity budget cuts would affect all Americans, but would disproportionately impact American Indians and Alaska Natives who rely on federal funding of the trust responsibility as well as social programs.”

Congress is governing at two and three week intervals because there are not enough votes to pass a real budget. And that’s not a good sign going forward because the budget only gets more complicated next year because of other issues that Congress has been avoiding.

Happy New Year.

Mark Trahant is the Charles R. Johnson Endowed Professor of Journalism at the University of North Dakota. He is an independent journalist and a member of The Shoshone-Bannock Tribes. On Twitter @TrahantReports

Reposting or reprinting this column? Please do so. Just credit: Mark Trahant / TrahantReports.com #IndigenousNewsWire #NativeVote18

Trahant Reports is on iTunes or Soundcloud. Download here. 

Republicans get their tax bill passed, and a shout out to the spirit of Andrew …

mellonz
Treasury Secretary Andrew Mellon championed tax cuts for the wealthy — and sharp budget cuts — in the years before the Great Depression. (Treasury Department photo)

Mark Trahant / Trahant Reports

Turns out we’ve been worried about the wrong, Andrew. The Republican tax plan, President Donald J. Trump’s signature legislation, would make Andrew Mellon proud.

Andrew Mellon was a wealthy industrialist who served in government as the Secretary of Treasury. Here’s what Trump’s own Treasury Department says about Mellon: “As the Nation embarked on the most materialistic period in its history, Mellon’s philosophy was one of debt reduction, tax reduction, and a balanced budget. His tax reform scheme, known as the Mellon Plan, reduced taxes for business. His theory was that big business would prosper in proportion to the lightening of its tax load and its profit would be transferred to the rest of the Nation. During much of his tenure, general prosperity and times of peace enabled Mellon to implement his measures. The Great Depression, however, beginning in 1929, undercut Mellon’s prestige and brought him under increasing criticism. Despite the downturn in the economy, Mellon continued his policy of balancing the budget by cutting spending and increasing taxes, which worsened the effect of the Depression on the ordinary citizen.”

History is prologue. Damn. You hardly have to change a word to know that this sentence is about now. Swap today’s Treasury Secretary Steven Terner Mnuchin for Mellon and the story still answers, what’s next?

Both the House and the Senate have now passed the legislation to cut taxes so that business will prosper by the lightening of its tax load and its profit would be transferred to the rest of the nation. The funny thing is that people really believe this load of crap. Then self-delusion was a common thread in the Senate debate. Maine Sen. Susan Collins voted yes because Mitch McConnell promised her budget cuts (including cuts to Medicare) would not follow. She even tweeted proof, a McConnell letter saying Congress has the power to waive such acts. But, does he have the will or the votes to do so?

The conservative wing is, at least, honest about this. When the tax cuts result in a massive expansion of debt they want sharp budget cuts. This is a core belief. And has been since Mellon’s time. Or as the Treasury Department puts it: “Despite the downturn in the economy, Mellon continued his policy of balancing the budget by cutting spending and increasing taxes, which worsened the effect of the Depression on the ordinary citizen.”

Or there was Arizona’s John McCain, the so-called champion of regular order, voting for a 479-page bill with handwritten amendments. A bill that will add (by Congress’ own estimate) about a trillion in debt was passed in a few weeks without the usual hearings or independent scoring. The maverick did not care about process. Get it done.

How bad is this bill? It’s right up there as one of the most unpopular bills ever. An average of polling shows its popular support at about one-third. And, get this, FiveThirtyEight reports that this bill is even more unpopular than tax hikes.

A couple of things about Indian Country: So many of our tribal citizens are the low end when it comes to earning. This bill does nothing to lighten that tax load. Indeed a late night effort to increase tax credits for children, making them refundable. (Remember nearly half of all Americans don’t pay income tax, it’s the payroll tax that is the burden. This would have helped.)

And instead of turning the dial back on fossil fuels this bill aligns the tax code for more development. Alaska Sen. Lisa Murkowski has made this part of the legislation her signature, not health care, and certainly not climate change (as she so eloquently talked about during the Alaska Federation of Natives convention in October.) She owns this.

The Atlantic magazine says this bill “could forever alter Alaska’s Indigenous communities” by development. “The issue still divides Native villages, counties, and Native nations in Alaska. It also sets tribes with differing claims to Alaska’s North Slope against each other.”

This bill also strips the mandate to buy insurance. A win for freedom, right? Perhaps. But it also means that healthy people will not buy as much insurance leaving sicker, older people to pay the bills. It will weaken the insurance framework. At least 13 million fewer people will carry health insurance as a result.

However there are winners: Big corporations, rich would-be heirs (like the Trump children) and religious schools (an amendment by Ted Cruz expands tax-free savings for this purpose).

The process ahead: This bill will still have to be reconciled with the House. There are differences, such as taxing graduate students and deducting medical expenses.

But cutting taxes (and then the budget) is something Republicans have championed long before Andrew Mellon. So this bill is likely to become law soon. President Trump can make both Andrews proud.

Mark Trahant is the Charles R. Johnson Endowed Professor of Journalism at the University of North Dakota. He is an independent journalist and a member of The Shoshone-Bannock Tribes. On Twitter @TrahantReports

Reposting or reprinting this column? Please do so. Just credit: Mark Trahant / TrahantReports.com #IndigenousNewsWire #NativeVote18

Trahant Reports is on iTunes or Soundcloud. Download here. 

What matters? Tax fight is about seven competing values #IndigenousNewsWire

doc_057b_big
Original federal tax return in 1913.

Why Indian Country should have a voice in this debate

Mark Trahant / Trahant Reports

There is no better way for any legislature — be it a tribal council, a state assembly, or a Congress — to telegraph what’s most important to a society than through tax policy. How a government collects revenue says what constituent groups are seen to matter. And, conversely, what groups and issues are insignificant. And, that of course, is Indian Country.

As Adrian Sinclair wrote in Cronkite News: “Indian Country once again does not have a seat at the table.” Tribes “aren’t treated the same as state and local governments across the board on a whole series of issues,” John Dossett, general counsel for the National Congress of American Indians, said after the hearing. “Tribes are … either ignored or they’re an afterthought.” He said there are many cases where state governments have more power than tribal governments, like the federal Adoption Tax Credit, which gives a credit to parents who adopt a child with special needs. But the credit only applies when a state court, not a tribal court, rules that a child has special needs.

So Indian Country is a perfect illustration for my larger point: A country’s tax policy shows what it values. The key to this idea is simple when a nation wants more of something, then taxes it less. And, other hand, if a nation wants less of something? Tax it more.

All interest on debt was deductible when the first income tax was created in 1894. Why? Because Americans did not like to borrow. It was almost immoral. As a writer for Harper’s Weekly warned a man in debt “must smile on those he hates, he must extend his hand where he would strike, he must speak pleasantly with a curse in his throat … He wears dependence like a yoke.”

But Congress made debt a better deal. You could borrow money for that new farm, or especially a home, and the government would subsidize the loan by making it a tax deductible transaction. By the 1920s car loans were the bigger deal. Americans were borrowing, buying and deducting. Congress created a monster with that policy and today debt is one of America’s great loves. Then in 1986 Congress switched gears: Today individuals can only deduct mortgage interest. But even that single benefit was generous. You could buy a big house. A bigger house. A ginormous house. And deduct 100 percent of the interest up to the cost up to $1.1 million of debt. And that tax deal includes second homes.

So as a policy the Congress was telling we the people buy bigger houses. And go ahead, get that second house in the woods or on the lake.

That’s what tax reform is, setting parameters for what the elected leaders think important for a national policy. So, if it becomes law, this tax reform will change the way we consumers spend money. Perhaps we’ll buy and build smaller houses and rent a cabin on the lake instead of purchasing one. This might be a good outcome for all of us. This is actually a pro-climate policy (please don’t tell Congress.)

This same priority process is true for renewable energy. Congress created incentives for wind, solar and other renewable energy. But, now the Republican plan is to reverse course, and reward oil, gas, and especially coal. Tax policy will favor fossil fuel development and renewable energy will therefore cost more. But will companies still invest? Who knows? We do know the calculations will be way more complicated. And, did I mention, renewable energy will cost more.

Let’s consider the overarching messages, the narrative, that will form policy in the tax bill before the Senate and the one already passed by the House of Representatives.

8-21-17tax_f1.png

ONE: The bigger the corporation, the bigger the break

The tax bills paid by corporations are driving the legislation in both the House and the Senate. Republicans argue that if taxes are lower, companies will invest more in the United States (instead of other countries) and hire more people at higher wages.  This debate is complicated because the current tax code is full of loopholes (something that Republicans say will be fixed). But the bottom line is that U.S. companies have a higher tax rate than what other countries charge, but, and this is huge, the companies actually pay less in federal taxes than what other other countries charge.

As the Harvard Business Review says: “First and foremost, corporate taxes are important because they help pay for government services. While they don’t account for as much U.S. tax revenue as they once did, they remain one of the central ways the government raises funds. According to the Tax Policy Center, “The corporate income tax is the third largest source of federal revenue, after the individual income tax and payroll taxes.”

The House bill cuts the top rate that large corporations pay from 35 percent to 20 percent. It would be the largest one-time drop in the big-business tax rate ever. And it’s a permanent change (the individual rates expire after a decade) at least until there’s another tax bill.

Companies will also get more deductions for purchasing new equipment. And there is an incentive for companies to move their profits back to the United States from low-tax countries.

The Senate bill is evolving. It also rewards big business. But in order to reduce the cost of the entire package, it delays reducing the corporate rate until 2019. (Imagine every business in the country holding off on just about any new activity because the tax laws changed next year.)

The metaphor: Multinational corporations rule.

TWO: It’s tough being rich

The New York Times’ Nicholas Kristof writes that it’s hard being a billionaire these days. “Why, some wealthy folks don’t even have a home in the Caribbean and on vacation are stuck brooding in hotel suites: They’re practically homeless! Fortunately President Trump and the Republicans are coming along with some desperately needed tax relief for billionaires.”

One way this works is be reducing the tax when someone inherits a wealthy estate. Both versions start this tax at $11 million. The House eliminates the so-called “death tax” in 2024 while the Senate keeps the tax but raises the exemption.

A second provision changes what’s called the Alternative Minimum Tax. The way that works is that after a tax return is completed, and there’s a whole slew of deductions, there is a calculation to see if that taxpayer should still pay something. The idea is to make sure that people earning more than $130,000 a year still pay an income tax, even if they find deductions in every corner. That goes away.

And there is one more goody for the rich. Charitable contributions can still be deducted.

The metaphor: Wealthy families so need our help. OMG.

THREE: Why work?

This part of the debate starts with the corporate tax rates. The Trump administration argues that cutting corporate taxes will benefit workers because companies will reward workers with better wages.

Treasury Secretary Steven Mnuchin claims that “many, many economic studies show that more than 70 percent of the burden of corporate taxes are passed on to the workers.”  However economists are divided. As the Center for Budget and Policy Priorities points out “this claim is misleading … the evidence indicates that most of the benefits from a corporate rate cut would go to those at the top, with only a small share flowing to low- and moderate-income families.  Mainstream estimates conclude that more than one-third of the benefit of corporate rate cuts flows to the top 1 percent of Americans, and 70 percent flows to the top fifth. Corporate rate cuts could even hurt most Americans since they must eventually be paid for with other tax increases or spending cuts.”

The bottom line is that the tax bill will not make life easier for people earning under $75,000 a year. The income tax portion might go down (depending on family size, smaller in this case is better) but costs will go up for education and health care.

And, on top of that, this tax policy will sharply reduce federal spending across the board. Last week the National Congress of American Indians (NCAI) and the Native American Finance Officers Association (NAFOA) came out against both the House bill and the Senate Finance Committee bills in part because of this point. “NCAI and NAFOA view it as deeply regrettable that neither the House nor the Senate bill takes seriously Indian Country’s priorities for tax reform,” a news release said.  “With respect to tribal nations, unless tribal provisions are included, the current tax reform legislation amounts to little more than a $1.5 trillion increase in the federal deficit over the next ten years. This deficit increase will inevitably create pressure to cut federal programs and services that are extremely important to tribal communities. Deficit-financed tax cuts that lead to austerity budget cuts would affect all Americans, but would disproportionately impact American Indians and Alaska Natives who rely on federal funding of the trust responsibility as well as social programs.”

The metaphor: Workers don’t matter.

FOUR: Help mom and pop sell stuff

Most people who own a small business structure their entity as Limited Liability Corporations, S-Corps, or a partnership. This means that the income generated is reflected on the individual’s tax return. The House lowers the taxes on profits from 39.6 percent to 25 percent and has a 9 percent increase on the first $75,000. The Senate goes a different route with a new incentives for small business. This is “pass through income” because of the structure. And this part of reform really does solve a problem. Small business is critical — especially in Indian Country — but does not get the attention (or the breaks) that large corporations do.

Rep. Markwayne Mullin, R-Oklahoma, said last week, “As a former small business owner, I understand firsthand how burdensome the current tax code is on Main Street. The Tax Cuts and Jobs Act delivers relief to mom-and-pop shops in our communities so that they can hire more individuals, grow their business, and invest more in our local economy.”

The metaphor: Small business is cool, too.

23116827_1272478376190630_2501867125517842173_o.png

FIVE: Elite colleges? Or is it, college only for the elite?

The House bill is an all-out attack on higher education. This is nonsense. Especially when the country needs to be competitive in a digital, knowledge-based world.

First up: Tax private universities’ endowments with a tax of 1.4 percent on portfolios that exceed $250,000 per full-time student. Only about a hundred schools would be affected, and it penalize colleges that have resources. Since those university operating costs will not go down, it’s not likely that this will result in more financial aid for students. The House also makes it impossible for tax-exempt bonds from private — and some public — institutions. This will make campus construction projects more expensive.

The House bill eliminates the deduction of interest for student loans. Americans now owe more than $1.4 trillion on student loans. It already is making it more difficult for young college graduates to buy homes, and transition into the middle class. This provision will be just one more thing. (And student loans are already stacked against the borrower. You can’t get rid of them in bankruptcy.) So instead of solving a problem, Congress is making it worse.

The House bill also repeals the Lifetime Learning Credit, eliminates the Coverdell savings accounts, but does expand the American Opportunity Credit.

The House bill would also classify tuition waivers as income (making a graduate student wealthy for tax purposes.) Imagine a “bump” in student’s income that is equal to tuition, some $30,000, $40,000 or even more. 

Laurie Arnold, Colville, director of Native American Studies and an Assistant Professor of History at Gonzaga University, remembers trying to explain this to Congress when she was in graduate school. “Many members of Congress had children enrolled in large/research universities, yet had no idea that graduate students teach the majority of introductory classes at those institutions. In general, the disconnect about this was broad, and many Members fell back on the language that not taxing the stipends was simply another tax break.”

Stipends are now taxed. And Congress is keen to add tuition waivers to the tax revenue pool. This will make it more difficult for people to pay for graduate school, and increase the debt levels for those who do. As a national policy this makes no sense. None.

As UCLA neuroscientist Astra Bryant told Wired magazine:  “I mentor two underprivileged undergraduate women, and my concern for them is that an increased tax burden would make it financially impossible for them to afford to pursue a PhD.”

And for Indian Country? There is already a shortage of graduate students and PhDs. Why should it be made more difficult?

The metaphor: College is stupid.

SIX: The growing gap between rich and poor

The gap between rich and poor is growing wider. “The wealthier you are, the more likely you are to benefit from the proposed tax changes. The poorer you are, the less likely you are to leave poverty,” writes Camille Busette for the Brookings Institute.

“Let me distill that: over one third of American households had trouble putting food on the table, putting a roof over their heads, or getting medical care; blacks and Hispanics are falling further behind whites in net wealth; and 99 percent of Americans hold a diminishing 76 percent share of income in the U.S. These are all alarming trends, but to have one-in-three consumers report that they cannot regularly put food on the table in the U.S., one of the wealthiest countries in the world, is the most deeply disturbing,” Busette writes. “Such a miserly budget, in combination with the tax reform plan, could mean the loss of some very important services for low-income and poor Americans.”

The tax reform measures will require massive budget cuts. Soon. Tribal governments will be hit hard. We already know how difficult sequestration was for tribes a few years ago. The kinds of cuts that will be needed to pay for these tax cuts will cost significantly more than sequestration.

The Center for Budget and Policy Priorities pegs these coming budget cuts at $5.8 trillion, $800 billion in cuts below sequestration levels.

The metaphor: You can’t afford to be poor.

SEVEN: Obamacare? Really? Again?

A serious question: Which house of Congress hates healthcare more?

The House kept the Affordable Care Act insurance mandates, but eliminates medical deductions. So a family that is dealing with a catastrophic, expensive medical event won’t be able to offset any of those costs from their tax bill. Already this provision is limited to higher income taxpayers. It’s only open to people who itemize their deductions, an estimated 8.8 million claimed it on their 2015 taxes, according to the IRS. But for those families that need this break, it’s a big deal.

Then the best thing Congress could do to help people with medical debt is to legislate another expansion of Medicaid. As Kaiser Health News reported: “A study from the Urban Institute may shed light on why Medicaid eligibility remains a pressing problem: medical debt. While personal debts related to health care are on the decline overall, they remain far higher in states that didn’t expand Medicaid. In some cases, struggles with medical debt can be all-consuming.”

The Senate is using tax reform to repeal parts of the Affordable Care Act. Again. The Senate would “save” money by ending the requirement to purchase insurance. It saves tax dollars because the government would not have to pay the subsidies for those who sign up under the plan (including those from Indian Country who get no cost plans under the exchanges).

And, repeating myself here, should a form of these bills become law there will be cuts across the board. The Indian Health Service (as well as Medicaid) will need to restructure because it will have so many fewer dollars.

The metaphor: Healthcare is only for those who can afford it.

 

A cold December

Congress wants to wrap up this debate before the end of the year and begin the provisions in the new tax year.

One more thing about values. The two tax bills define what’s important to a society. Alaska’s Sen. Lisa Murkowski was a champion on health care and was a key vote to stop the last Affordable Care Act repeal effort in the Senate. But this time there are competing values. She has also been a longtime supporter of opening the Arctic National Wildlife Refuge to oil and gas development. That’s in the bill. It’s her provision. So is she willing to give up on health care for more oil? And what about climate change? Murkowski was eloquent at the Alaska Federation of Natives saying that she is witnessing first-hand the impact in northern communities. This tax bill gives fossil fuels a boost — at the expense of the climate.

What’s really important? We are about to find out.

Mark Trahant is the Charles R. Johnson Endowed Professor of Journalism at the University of North Dakota. He is an independent journalist and a member of The Shoshone-Bannock Tribes. On Twitter @TrahantReports

Reposting or reprinting this column? Please do so. Just credit: Mark Trahant / TrahantReports.com #IndigenousNewsWire #NativeVote18

 

 

 

Indians don’t pay taxes? Or why the coming tax debate matters so damn much

Screen Shot 2017-10-01 at 1.24.06 PM.png
House Speaker Paul Ryan and Senate leaders announce their framework for Tax Reform. (Photo: Speaker.Gov)

Mark Trahant / Trahant Reports

The Senate has given up on destroying Medicaid and much of the health care system and is now focused on restructuring the federal tax system (and destroying entitlement programs in the process).

Here is what Speaker Paul Ryan said Sunday on CBS’ Face the Nation:  “We’re going to double that standard deduction. We’re going to make it so he can fill out his taxes on a postcard. We’re going to lower his taxes. That’s really important. So he has more tax-home pay. But there’s another component to this is, look at this machine shop, this business pays about a 40 percent tax rate but it competes with companies all around the world who pay an average 22 and a half percent on their taxes.”

The GOP Framework begins with this set of principles: “President Trump has laid out four principles for tax reform: First, make the tax code simple, fair and easy to understand. Second, give American workers a pay raise by allowing them to keep more of their hard-earned paychecks. Third, make America the jobs magnet of the world by leveling the playing field for American businesses and workers. Finally, bring back trillions of dollars that are currently kept off-shore to reinvest in the American economy.”

So how does Indian Country fit into that framework? Indians don’t pay taxes, remember? Actually if you Google that phrase it returns 2.17 million hits. It’s still a myth that will not fade away. But the larger issue of tax reform and its impact on Indian Country is still a complicated question, one that starts with the definition of “taxes.” Most so-called middle-income wage earners pay income taxes. Roughly one-third of all wage earners do not pay income taxes — and that would include a lot of tribal citizens, especially those living in their tribal nations. There are nearly 150 million tax returns filed every year and 36 million end up paying no tax at all. Another 16 million had taxable income but didn’t pay anything because of tax credits, deductions and other adjustments.

And, many of Indian Country’s working class especially benefit from one such credit, the Earned Income Tax Credit. This is a hugely successful policy that returns cash money to some 7 million family incomes; a paid bonus of sorts for working.

“Numerous studies show that working-family tax credits boost work effort,” according to The Center for Budget and Policy Priorities. “The EITC expansions of the 1990s contributed as much to the subsequent increases in work among single mothers and female heads of households as the welfare changes of that period, extensive research has found. Women who benefited from those EITC expansions also experienced higher wage growth in subsequent years than otherwise-similar women who didn’t benefit.  And, by boosting the employment and earnings of working-age women, the EITC boosts the size of the Social Security retirement benefits they ultimately will receive.

In addition, the research shows that by boosting the employment of single mothers, the EITC reduces the number of female-headed households receiving cash welfare assistance.”

So far, at least, there is no plan to end the Earned Income Tax Credit. However the House Budget Committee has proposed that the IRS require more proof from taxpayers and audit homes with an error. (Auditing the poor seems a long way from the Willie Horton philosophy of tax collection, or bank robbing, and that’s the idea you go where the money is.)

69acbbc5-36de-41de-942c-c1b9dd86047b

It turns out there is a lot of data on tax collection by county. So I looked at the counties with significant a Native American population and there is some fascinating data from the Internal Revenue Service, based on 2015 tax returns.

In Oglala Lakota County, for example, some 2,010 taxpayers out of 3,980 collected an average of $3,020. The bulk of that was collected by families earning less than $25,000. And the average tax bill was $7,170. The county is comprised almost entirely of Native Americans and the Pine Ridge Reservation.

The Earned Income Tax Credit is also critical to many Navajo families. In Apache County, Arizona, that includes a large portion of the Navajo Nation, some 27,172 take advantage of the Earned Income Tax Credit. And, like Pine Ridge, most are in the under $25,000 category, but the amounts are significantly more, an average return of a little more than $4,000.

In the Bethel Census Area of Alaska there are similar numbers. Nearly 2,400 people claimed the Earned Income Tax Credit and most of the workers earned under $25,000 and averaged a refundable return of $2,738.

My point here is that this is the one policy that is essential to Indian Country because it benefits so many people who have jobs but who barely earn a living wage. Any changes to this tax credit should be opposed vigorously.

It’s also important to remember that most tribal citizens pay  a higher percentage of our income toward payroll taxes, instead of income taxes. A report by the Congressional Joint Committee on Taxation says that the 80 million tax filers making $40,000 or less will collectively pay no federal income tax and many will even receive cash payments from the IRS in 2015. But they will pay $121 billion in Social Security and Medicare payroll taxes (including the employer share, which most economists believe falls on workers).

So that will be another important factor to watch as the debate heats up. Rarely does the payroll taxes — Medicare, Social Security, etc. — sneak into the larger debate about taxes. But it should be about the total taxation, not just income taxes.

And one other unique characteristic of Indian Country tax data is that the amount paid to state and local governments is significantly lower than the general population. In most states tribal members living on their home tribal nation pay zero in state and local taxes. This will be important to remember when Congress debates the deduction of state and local taxes. (A big deal for people living in high tax states such as California or New York, but less so in low tax states and where the sales tax is the primary method to fund state government.)

Congress has a complicated road ahead before it can even pass a tax bill. The plan is for both houses to enact a budget resolution, setting out the priorities for tax reform. This is a document that basically sets limits on spending (so the committees will still decide how to spend money for Indian programs, but will be limited by their budget ceiling). This will not be easy. The House and Senate will need Republicans to stick together on fiscal issues ranging from the border wall to how large federal programs should be cut back.

Basically the same tension that existed during the health care debate will play out between so-called moderates and the more strident anti-government wing of the Republican party.

If a budget is passed, the Senate can start take up tax reform and need only 50-votes to pass the legislation. Remember, if.

Speaker Ryan talked about fixing the business rate. The Republican mantra is that U.S. companies pay more than their global competitors. (Funny: This same argument doesn’t come up with health care where a company like Boeing spends a lot on its employee health care while the French Airbus can rely on its national health care system to save money.) But there is one last issue to watch: Don’t just believe any number that is posted as a tax rate. There may be a tax with 40 percent tax rate, but if the deductions and credits add up, the effective tax rate could be 20 percent. So that’s the number to watch and ask about, how much is that effective tax rate?

One final point: It’s interesting that so much of the discourse is about companies wanting to pay lower taxes as an incentive to create more jobs. Yet many technology companies are moving to the higher tax land called Canada. “As America closes its borders, Canada is playing the longer, smarter game,” Richard Florida and Joshua Gans wrote in Politico this week. “Canada, more than any other place, is uniquely positioned to benefit from Trump’s anti-immigrant posture … If he keeps up his anti-immigration push, the United States’ polite neighbor to the north could soon be eating Americans’ lunch.”

It’s not always about the taxes.

Mark Trahant is the Charles R. Johnson Endowed Professor of Journalism at the University of North Dakota. He is an independent journalist and a member of The Shoshone-Bannock Tribes. On Twitter @TrahantReports

Reposting or reprinting this column? Please do so. Just credit: Mark Trahant / TrahantReports.com #IndigenousNewsWire #NativeVote18

ICYMI: My first audio election special is on iTunes or Soundcloud. Download here.