The Tax Cuts and Jobs Act has been the crowning achievement of the Trump administration and the Republican-controlled Congress over the past year and a half, with dramatic changes to tax law including large cuts in corporate tax rates and substantial shifts in tax brackets, deductions, and credits for individual taxpayers. Yet many opponents of the tax reform efforts have noted the upward impact on the federal budget deficit that the new laws will cause, and they argue that reversing course and restoring at least some of the previous tax provisions that existed before the new law took effect is the best way to avoid a fiscal crisis.
Democratic candidate Sean Casten is challenging incumbent Rep. Peter Roskam (R-Ill.) in the 6th District of Illinois, which includes a substantial portion of the northwestern side of suburban Chicagoland. In a blog post, Casten outlined his plan to, in his words, "bring fairness and rationality to our tax code" by revisiting the Tax Cuts and Jobs Act as well as looking for other potential sources of tax revenue. In what some are seeing as a possible strategy that other Democratic challengers could use to seek to unseat Republican lawmakers, the plan outlines several provisions to reverse or amend.
Bring back the old 39.6% tax rate
Tax reform reduced the majority of the tax brackets that existed under prior law, and one move that received particularly strong criticism was the reduction of the top rate from 39.6% to 37%. Opponents argued that the reduction for the top bracket unfairly gave high-income taxpayers greater relief than lower-income taxpayers, although proponents of the measure pointed to substantial reductions lower down in the structure, including the reduction of the old 15% bracket to 12%.
Casten would bring back the 39.6% rate, but only at a higher income level than the old brackets covered. The candidate argues that those making $1 million or more should pay the old rate in an effort to make the tax bracket structure more progressive.
Replace lower corporate tax rates with investment-tied tax breaks, especially for key industries
Another controversial provision of tax reform was the dramatic reduction in corporate tax rates from 35% to 21%. Proponents argued that the move would stimulate investment in the U.S. economy, but skeptics point to the rise in stock buybacks and dividend increases as benefiting corporate shareholders more than company employees.
Casten's plan doesn't specifically state how much higher it would go in pushing corporate rates back toward 35%, but it highlights the need to focus on investment tax credits, accelerated depreciation, and a general restructuring of the depreciation framework in order to reward those companies that actually seek to grow their businesses by investing capital.
The Illinois Democrat's plan singles out the need to help industries that are suffering from international competition, such as manufacturing. Some of the favorable tax provisions described above could go specifically to businesses in those key industries, with the intent of making them more competitive in the global economy.
Get rid of the new pass-through deduction, but bring back SALT
In addition to corporate tax reform, the Tax Cuts and Jobs Act's provisions to allow owners of partnerships, limited liability companies, and sole proprietorships a deduction for the business income they generate also received criticism from the Democratic candidate. Despite its broad-based application, Casten focused solely on professionals like doctors and attorneys with his scorn for the provision, arguing that they don't deserve a tax cut at the expense of their workers, yet argued that the entire provision should be repealed.
However, Casten didn't hesitate to point to his own district in suggesting a reversal of one of the revenue-generating aspects of tax reform: the new limit on the state and local tax deduction to $10,000. The candidate believes full deductions should be restored, giving highly taxed Illinois residents some relief on their federal returns.
Finally, the Congressional candidate's tax plan includes some ideas for new taxes. First, Casten would eliminate the cap on Social Security payroll taxes, currently at $127,200, in order to shore up the program's financial stability.
Also, the potential to use the border-tax framework that the White House had initially looked at closely could help make U.S. manufacturing more attractive. Even if higher corporate tax rates are restored, imposing taxes on overseas production facilities would give their domestic counterparts an economic and competitive edge.
A sign of things to come?
Some of the provisions Casten pointed to are district-specific, but many of them are broader-based ideas that other opponents of recent tax reform legislation have highlighted. With plenty of other possible proposals to undo what opponents see as the shortcomings of tax reform, it's unlikely that this particular plan will serve as the sole blueprint for Democrats running against incumbents who favored the law. Nevertheless, the proposal does indicate just how contentious the midterm elections are likely to be on this key issue of tax reform.