Congress

Tim Scott targets poverty in GOP tax plan. He’s got a big challenge

Trump outlines tax reform plan during speech in Indiana

Speaking at an event in Indianapolis on September 27, President Donald Trump said that his tax proposal will help middle class families save money and will eliminate loopholes that benefit the wealthy.
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Speaking at an event in Indianapolis on September 27, President Donald Trump said that his tax proposal will help middle class families save money and will eliminate loopholes that benefit the wealthy.

Sen. Tim Scott has made raising people out of poverty a centerpiece of his legislative agenda on Capitol Hill, and he sees his party’s push to overhaul the nation’s tax code as a way to make that happen.

It’s not clear, however, whether the GOP’s new tax overhaul proposal will accomplish those goals. Or whether Scott’s own ideas will be integrated into a final product. Or, for that matter, whether any bill will get passed at all.

For now, at least, the South Carolina Republican has been given a seat at the table to help negotiate the framework for what the GOP hopes will be the first sweeping tax code rewrite since 1986.

Scott is a member of the Senate Finance Committee, one of the panels that will write tax overhaul legislation. Republican Senate leaders designated him as one of the party’s lead “messengers” for the effort in December, singling him out for being able to talk about a very complicated issue in tangible terms.

At a press conference on Wednesday where Republican leaders unveiled their framework, Scott was selected as one of only a few speakers to comment on the proposal.

The only black Republican in the Senate, he spoke with the unique perspective of having grown up in a single-parent household, mired in poverty, in North Charleston. He talked about how his mothers and mothers like her – he mentioned a constituent named Sherri – struggle to raise their children while seeing so much money withheld from their paychecks.

“This tax reform conversation is about ‘hashtag, keep yo’ money,’” Scott said in closing, eliciting approving laughter from his peers.

Scott told McClatchy he’d been a part of conversations regarding the party’s proposal for tax reform since late last year. He said President Donald Trump has expressed interest in Scott’s “Investing in Opportunity Act,” which would delay capital gains taxes for investors who are willing to make investments in distressed communities.

In South Carolina, the poverty rate is 15.3 percent, according to the U.S. Census Bureau. The national average is 14 percent.

This tax reform conversation is about ‘hashtag, keep yo’ money,’

Sen. Tim Scott, describing how lower income people view the proposal tax overhaul

“I think a lot of the opportunity agenda is now front and center because of the tax reform package, and I’m thankful I’ve had the opportunity to work with the White House, (Chief White House economic adviser) Gary Cohn, and (Treasury Secretary Steve) Mnuchin, meeting with them for the past six and seven months,” Scott said.

Scott’s ability to deliver depends heavily on whether Congress can pass any tax bill, an ambitious undertaking at a time when members of the majority party are philosophically at odds with one another on a whole range of issues.

Though Democratic party leaders have said they might be willing to work with Republicans, so far they have largely responded negatively to the framework, bemoaning that the plan favors the richest of the rich and dubbing it “wealth-fare.”

While Scott is being asked to sell the tax proposal nationally, he also said he has been engaging closely with South Carolina interests.

“The G.E.’s and the BMW’s and the Boeings to small business owners, franchises like restaurant chains and folks who own restaurants to folks who are in the construction world and insurance industry,” Scott said, ticking off the list of groups he had spoken to since December.

South Carolinians should “love” what congressional Republicans have put together so far, Scott said.

“If you are the poorest of South Carolina, you actually get a lot more money,” he explained. “Doubling the standard deduction means that across the income scale you will actually have more opportunities to get your money, because as opposed to itemizing and not breaking through the threshold, you actually get the money just because you’re there.”

Scott also cited a finding by “economists on the left and the right” that up to 70 percent of corporate taxes are effectively paid by workers, so a corporate tax break should result in workers receiving higher wages.

This is good stuff

Sen. Tim Scott on the GOP tax plan

Since Scott has been working closely on the tax plan’s framework behind the scenes, it could be he is familiar with some of the finer points not yet been released to the public.

Based on what’s currently public, however, it’s not clear the tax plan would truly help the poorest South Carolinians, according to University of South Carolina tax law professor Clinton Wallace.

“One of the issues with this plan right now is, if you currently don’t pay income tax, there’s nothing here that will help you at all. And that is a pretty large group,” Wallace explained to McClatchy.

“About 21 percent of households that file tax returns have no income tax liability. In South Carolina, it’s double that. Forty-two percent of South Carolina households that file tax returns have no income tax liability.”

Under current law, families of four earning $28,800 and individuals earning $10,400 are exempt from federal income tax payments. The new framework would bring the threshold for families down to $24,000 and individuals up to $12,000. Wallace said with these numbers, some families would have higher income tax liabilities and some individuals would have lower liabilities. But most low income earners would find their situation unchanged.

The current framework will be well-received by businesses that will receive lower rates, said Wallace, especially high-income service providers like attorneys.

“There are fewer high income people here than in New York or California,” he pointed out, “so we as a state get less of those benefits, but certainly there are people here who will be happy.”

On Thursday, Scott said he had spoken to only “three or four” South Carolinians in the 24 hours since the GOP tax proposal was first released in Washington.

“They don’t have enough information to say if they like it or not,” he said. “They are optimistic, and they are leaning into the conversation, which is good news.”

Emma Dumain @emma_dumain

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