In fact, if the GOP tax plan becomes law, we may be looking at a future where our 1,600 richest hold more wealth than the nation’s entire middle class.
Ever hear the one about the guy who hits the superfecta in the first race at Churchill Downs and wins $20,000, only to give his jackpot all back, plus another $400, on the remaining races.
So what’s the punch line? Well, under the GOP tax plan now speeding through the Senate, that guy would lose ten times in income tax what he did at the track. That’s because the plan trots out an unfair gimmick that socks the middle class to underwrite tax breaks for mega millionaires and the corporations they run.
Here’s how this gimmick nicks our unfortunate bettor at Churchill Downs — for $4,400! Say our guy and his wife earn $100,000 per year, pay $3,000 in mortgage interest on their Louisville home, and give $1,000 to their church and other charities. This couple would be required to report the $20,000 winnings as income.
Now the couple also could take $20,000 of our bettor’s subsequent losses as an itemized deduction. But if our couple does take that deduction, they would have to forgo the $24,000 standard deduction under the Trump-GOP plan to do so, a move that obviously means they’d see no benefit. The net-net: Our friend’s losing day at the track would cost him and his wife $4,400 in additional federal income tax.
This gimmick in the Senate tax bill would hurt horseplayers in any state. The gimmick could also impact the thoroughbred racing industry, and, if it did, the state of Kentucky would take the biggest hit. Are you listening, Mitch McConnell and Rand Paul, Kentucky’s two U.S. senators?
Another similar gimmick in the Senate tax bill would likely work tax unfairness against folks who engage in horse breeding as a hobby — and also impact Kentuckians disproportionately.
This particular gimmick would trigger whenever a taxpayer has an income stream inextricably tied to offsetting items of loss or expense. The tax code currently requires individual taxpayers to separate out non-business income from the offsetting items of expense or loss, rather than netting them out, as business owners can do. The tax code goes on to essentially cheat these taxpayers by requiring full recognition of the income items while limiting the deductibility of the associated expense or loss.
This amounts to a relatively minor problem under existing tax law. But the Senate tax plan makes this problem far worse by raising the threshold for deductibility of non-business expenses and losses. Under the plan, the first $24,000 of those expenses and losses could provide no offset against the income to which they relate.
The bottom line: Under the Senate tax plan, those taxpayers who dabble in horse breeding could take tax hits of $4,400 or more for merely breaking even.
Kentucky’s Mitch McConnell could have used his clout as the Senate’s majority leader to confront this unfairness. He didn’t, demonstrating still once again that the Senate tax plan does nothing to really “reform” the tax code. This plan simply enriches the already rich.