Himes, Arora debate tax reform
NORWALK — Competing to represent Fairfield County — home to many high-earners who could see big tax cuts due to the federal tax overhaul — two former Greenwich financiers disputed the controversial legislation’s impact on individuals and corporations.
In their second head-tohead debate, Democratic U.S. Rep. Jim Himes and Republican Harry Arora tackled taxes, labor and the economy before a crowd of about 100 breakfasters at the Norwalk Inn Thursday morning.
Himes, a Democrat, said the Republican tax reform will only make rich people richer and grow the federal deficit, eventually requiring cuts in government services that would hurt low-income Americans.
“Most of Americans have figured out this was a massive transfer of wealth to many wealthy people,” said Himes, who previously worked at Goldman Sachs and the affordable housing nonprofit Enterprise Community Partners.
But Arora, echoing his
party’s comments when the bill was passed in December 2017, argued tax benefits would also go to the middle class and lead to economic growth.
“If we grow at 3 percent, the amount of tax collections will compensate for more than half of the tax cut,” claimed Arora, who traded commodities for Enron, Amaranth Advisors and his own hedge fund, Arcim Advisors.
The exact impact of the tax overhaul has not yet been seen because Americans have not filed taxes since the law took effect in January 2018. The Connecticut Department of Revenue Services will not release its annual report with tax collection data for fiscal year 2017-18 until December.
But studies of the law have reached a few conclusions. First, the law will reduce the average tax rate for most households over the first few years after enactment, increasing aftertax incomes, according to the nonpartisan UrbanBrookings Tax Policy Center. But the largest tax reductions will accrue to high-income households.
In the high-tax state of Connecticut, however, the overhaul could raise some people’s taxes by capping the state and local tax deduction at $10,000. The Tax Policy Center says the average SALT deduction in Connecticut is $19,665.
In response to tax overhaul, Connecticut and other states adopted various workarounds lessen the impact of the SALT cap on their residents, but the U.S. Treasury Department blocked all such policies in August.
On the corporate side, the law delivered a large, permanent tax cut to companies: slashing their rate from 35 percent to 21 percent.
In the debate, Arora applauded the cut, arguing that it made businesses more “competitive” and might bring corporate profits back from overseas.
Himes agreed “we should have lowered” corporate taxes. But he disputed the idea that the corporate tax cut has grown the economy.
“Companies have used their profits to repurchase stock and pay down their debt,” he said.
Himes’s biggest opposition to the law was the way it is predicted to grow the federal deficit. The Trump administration initially said the tax overhaul would pay for itself, but in June, its Office of Budget and Management said it had revised its forecasts from earlier this year to account for nearly $1 trillion of additional debt over the next decade.
An April report from the nonpartisan Congressional Budget Office put deficit growth at $1.9 trillion between 2018 and 2028, a number repeatedly cited by Himes.
“That’s $2 trillion we are not spending on infrastructure,” he said. “$2 trillion that we are not spending on investment or training. That’s $2 trillion, the vast bulk of which got handed to the top 1 percent of people in this country.”
Arora responded, “Those numbers are all, as I would say, upside down.”