WASHINGTON – President Donald Trump said Wednesday that Americans received an “incredible Christmas gift” in the form of a tax overhaul approved by the House and Senate this week, but critics contend it’s more like a lump of coal for average New Mexicans.
The $1.5 trillion overhaul slashes taxes for corporations and the wealthiest Americans and offers smaller reductions for middle- and low-income families. Nearly half of all New Mexicans don’t make enough money to owe federal income taxes. Many who do pay federal income taxes will see at least modest increases in their take-home pay.
The legislation marks the first major overhaul of the U.S. tax code in three decades.
“The heart of our bill is a tremendous amount of relief for the middle class, including a doubling of the child tax credit and a nearly doubling of the standard deduction,” Trump said at the White House on Wednesday after the bill cleared both chambers. “That’s going to be tremendous for people. They’re going to start seeing the results in February.”
Trump said “probably the biggest factor” in the 521-page bill is a provision reducing the corporate income tax from 35 percent to 21 percent, aimed at encouraging companies to invest in the U.S. and create more jobs.
“Our companies won’t be leaving our country any longer because our tax burden is so high,” Trump said.
Buoyed by news of the tax bill’s passage, telecommunications giant AT&T announced Wednesday that it would give 200,000 of its U.S. workers who are union members a special bonus of $1,000. Comcast also announced that it will give $1,000 bonuses to more than 100,000 of its employees.
New Mexico’s four congressional Democrats harshly criticized the legislation, which Trump said he will sign in the coming days. Sen. Martin Heinrich, the ranking Democrat on the Joint Economic Committee, called the bill “reckless” and said it “won’t do much to accelerate growth in New Mexico.” New Mexico, with its sluggish economy, has a relatively low number of corporations that would reap big benefits from the tax legislation.
“They’ve abandoned working American families while recklessly blowing up the deficit in order to reward their wealthy friends and corporations with a tax cut that they do not need,” Heinrich said of the GOP majorities that pushed the bill through Congress .
Starting next year, families making between $50,000 and $75,000 will get tax cuts averaging $890, according to an analysis by the nonpartisan Tax Policy Center. Families making between $100,000 and $200,000 will get tax cuts averaging $2,260, while families making more than $1 million will get tax cuts averaging nearly $70,000, according to the analysis.
But if the cuts for individuals are allowed to expire, most Americans – those making less than $75,000 – would see tax increases in 2027, according to congressional estimates. New Mexico’s median family income is $48,451, the fifth-lowest in the nation. GOP backers of the bill contend those tax cuts are likely to eventually be extended for the middle class.
The bill also limits what homeowners can deduct in terms of state and local property taxes and income and sales taxes from their federal returns. The legislation approved this week limits these deductions – which can be any combination of property, income, and sales taxes – to $10,000.
In addition to changing the tax code for businesses and individuals, the legislation repeals a congressional mandate that required Americans to purchase health insurance or pay a penalty – a key provision of the Affordable Care Act. It also paves the way for oil drilling in Alaska’s Arctic National Wildlife Refuge, which has been the focus of one of the nation’s longest-running environmental battles. Democrats quickly threatened lawsuits to prevent drilling in the refuge.
Rep. Steve Pearce, the only Republican in New Mexico’s congressional delegation and a candidate for governor in 2018, celebrated the tax overhaul as a win for small businesses and middle-class residents of the state.
“This will allow New Mexicans to move closer to their goals of saving for retirement, going to school or simply having enough money to afford emergencies,” Pearce said, referring to the tax breaks for individuals. “Additionally, this tax overhaul will reduce taxes on corporations and small businesses, which will encourage more job creation and put confidence back in our economy.”
Rep. Michelle Lujan Grisham, a Democrat from Albuquerque, is also running for governor of New Mexico next year. The three-term congresswoman voted against the bill this week, calling it “the most destructive and immoral piece of legislation I have voted against since serving in Congress.”
“We have the third-highest unemployment rate in the nation, half of our population is on Medicaid, and one in every four New Mexico children do not know where their next meal is coming from.” she said. “New Mexicans deserve a tax package that prioritizes middle-class families and small businesses, lifts families out of poverty, increases targeted investments in education and innovation, and incentivizes businesses to grow wages and create jobs.”
Meanwhile, partisans from both sides of the aisle in New Mexico said the tax bill will be a key issue in the 2018 elections.
Ryan Cangiolosi, chairman of the Republican Party of New Mexico, said Republicans will be rewarded at the polls for their party’s support of tax cuts.
“Tax reform is good for families, good for businesses and good for our economy,” he said. “Voters will remember where their elected officials stood when it comes to casting their vote in November.”
Richard Ellenberg, chairman of the New Mexico Democratic Party, also said the tax overhaul will be an issue in the 2018 elections, but for different reasons.
“I expect this to be an issue with Steve Pearce’s race (the gubernatorial contest), and an issue in the 2nd Congressional District race,” where Pearce is vacating his House seat to run for governor, Ellenberg said.
The state Democratic chairman also said Republican congressional leaders’ pledge to overhaul entitlement programs such as Medicare, Medicaid and Social Security in 2018 should worry those in low-income states such as New Mexico.
Brian Sanderoff, president of Research & Polling Inc. and a longtime observer of New Mexico politics, said it’s too soon to tell how the tax overhaul bill will play in the state’s elections next year.
“Democratic and Republican candidates will try to use the tax reform law to their political advantage in New Mexico, with Republicans saying it will help grow the economy and jobs, while Democrats will say it just benefits the wealthiest individuals and corporations,” Sanderoff said. “But the midterm elections are nearly one year away, which is a long time in politics.”