Kentucky Democrats and University of Kentucky graduate students shouted their opposition to a Republican proposal for overhauling the federal tax code Wednesday as Senate Republicans, led by Kentucky’s Mitch McConnell, inch closer to passing a bill.
“What the Republicans are proposing to do is create a tax system that rewards wealth over work,” said former Democratic state Auditor Adam Edelen at a rally in the Robert F. Stephens Courthouse Plaza. “That is absolutely antithetical to the American experience. It is antithetical to the American dream.”
The details of the bill are still in flux as McConnell works to secure 50 votes, but Kentucky’s other U.S. Senator, Rand Paul, has said he supports the Senate’s version of the bill, in part because it would eliminate a provision in the Affordable Care Act that taxes people who do not have health insurance.
Earlier this month, U.S. Rep. Andy Barr, R-Lexington, was among the Republicans who voted for the House version of the bill, saying it will spur economic growth.
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“This needed legislation will allow hard-working American taxpayers to keep more of their paychecks, simplify the code by eliminating special interests loopholes, and make our businesses more competitive so that we can keep more jobs here at home,” Barr said at the time.
Democrats, though, said Wednesday that the bill does more to benefit the rich than middle-class Americans.
“The only people that are going to benefit from this tax plan are the wealthy and the big corporations,” said state Sen. Reggie Thomas, D-Lexington, calling the tax bill “a tax hike for America.”
Amy McGrath, a retired Marine fighter pilot who is running against Thomas in the Democratic primary to challenge Barr in Central Kentucky’s 6th Congressional District, said the benefits of the bill to middle-class veterans is negligible. She also pointed to a provision that would require someone to live in a house for five years in order to qualify for a tax break when selling the home.
“We do not stay in a place for five to eight years as a military family,” McGrath said after rattling off a long list of the places she’s lived. “So you’re going to tax us more. That’s wrong.”
Julie Martinez, an activist representing the recently merged liberal groups Together We Will Bluegrass and Indivisible Bluegrass, criticized a provision of the bill that eliminates a tax break teachers get for using their own money to buy classroom supplies.
“$250 might not sound like a lot of money to Donald Trump, but it’s a lot of money to my friends who are teachers who go out and buy supplies for their kids because they need them to teach,” Martinez said.
A few miles away, more than 100 University of Kentucky graduate students rallied against the plan, which they said could cripple higher education in general and graduate education in particular. The rally was organized in concert with a national graduate student walkout at campuses across the country.
“To put it simply, it will devastate many of us,” said Kaylynne Glover, head of the UK Graduate Student Congress.
The tax bill would affect higher education in a number of ways, including adding a tax on tuition waivers, or the fellowships that many graduate students receive in return for research and teaching.
Rally organizer John Terbot estimated that for most UK graduate students, taxes would go up about $3,000 a year.
“This could reduce the number of teachers and researchers and may cause people to drop out of graduate school,” he said.
One version of the bill also would tax the value of tuition breaks that many schools offer to their employees’ children. At UK, for example, that $5,250 benefit is currently untaxed.
Both the House and Senate versions of the bill would start taxing big endowments, although Kentucky’s legislators are working to exclude Berea College from that provision because the school uses its $1 billion endowment to waive all tuition for students.
“We are confident that Berea will not be affected in the final version of the bill,” said Rick VanMeter, a spokesman for Barr.
The House version of the bill would deeply hurt Berea’s ability to serve low-income students, said President Lyle Roelofs.
“We are happy to say, however, that Congressman Barr and Senators McConnell and Paul are very much aware of the potential harm of an excise tax on endowment earnings to Berea’s mission of serving only students who would not otherwise be financially able to attend college,” Roelofs said.
As the Senate bill makes its way toward a vote, lawmakers are debating whether to add a trigger that would raise taxes if the bill increases the national debt. Some conservative senators have said they will not support a bill with a trigger.
At the rally in Lexington, Democrats homed in on the issue.
McGrath quoted former Chairman of Joint Chief of Staffs Admiral Michael Mullen, saying the greatest threat to national security is our own debt, a line Barr has frequently used when campaigning.
“Why is this tax cut bad? Because it adds 1.5 trillion to the national debt,” McGrath said. “They’re making this problem that we already have, that Admiral Mullen already said was our number one national security threat, they’re making it worse.”
The Congressional Budget Office estimated that the Senate version of the tax bill would increase the national debt by $1.414 trillion between 2018 and 2027, a number that a Barr spokesman said would be offset by a stimulated economy.
“The deficit and the debt have always been and remain major concerns for Congressman Barr,” VanMeter said. “That is why he has consistently voted for budgets that will address our spending crisis and balance. In addition to spending cuts and reforms, Congressman Barr also recognizes that economic growth is essential to balancing the budget. Tax cuts will mean more jobs and bigger paychecks — which will result in more taxpayers and more revenue.”
A study by the conservative-leaning Tax Foundation in Washington D.C. estimated that a middle-income family in Kentucky would gain $1,996 in after-tax income under the Senate’s tax plan. The study also estimated Kentucky would gain 12,246 full-time jobs if the bill passes.
Several CEO’s of major corporations, though, have raised doubts about those claims.
For example, Cisco, Coca-Cola and Pfizer have promised to turn most of their gains over to shareholders, according to Bloomberg News.