The caller was a friend that I haven’t seen for too long.  She’s up in years, older even than me, but as quick-witted and engaging as I remembered.  “Why”, she wanted to know, “haven’t you written about Republicans’ plan to take away deductions for medical expenses?”  Then she told me her story.  I had promised myself a respite from the tax law controversy, but it’s too important to be left alone.

Karen and her husband Jim (not their real names) are neither poor nor wealthy.  They saved and managed their money well in preparation for retirement but Jim is now ill, disabled, and in need of daily assistance in just about all of his activities.  With Karen’s help, he doesn’t have to go to a nursing home, but she can’t meet all of his needs so she pays for daily help.  Medicare and insurance don’t cover the cost.  The budget is tight but they make it work.

Under current tax law Karen can deduct medical expenses that exceed 10 percent of their income.  So, if their taxable income is $50,000 and the medical expenses not covered by insurance are $20,000, here’s how it works.  They pay an amount equal to 10 percent of income, $5000 in this case.  That leaves another $15,000 of expenses that she can deduct from their income.  So they will pay income tax on $35,000 rather than $50,000.  If they are in the 15 percent tax bracket, the deduction would save them $2250.  That’s a lot of money when you’re on a tight budget.

The fate of their deductions will be decided behind closed doors in a House-Senate Conference Committee.   The Senate version of the Republican bill will allow the deduction.  If the House version passes, Karen and Jim will be spared the trouble of keeping records because the expenses won’t be deductible.

“What can we do?” Karen asked me.  I stuttered a lot trying to find an answer.  She wrote and called congressmen.  She never got to talk to one and her perception is that their minds are made up to pass a bill quickly without considering who will be hurt.  She’ll try again anyway because neither of us knows an alternative.

The fates of Karen, Jim and millions of other Americans are in the hands of congressional Republicans who seem intent on passing a law before public opposition rises to an insurmountable level.  There have been no public hearings with expert testimony, no people like Karen explaining their concerns and few, if any, town hall meetings where legislators face voter questions. Republicans seem desperate to pass something – anything – rather than face economists, experts and angry constituents.

It’s easy to get lost in lists of tax bill losers: the sick, graduate students, the middle class, residents of high tax states, on and on.  Hundreds of issues are up for grabs.  They’re all important but to focus on any one of them is to miss the fact that we have no financial plan for our national future.  Either version of the Republican bill will add somewhere between $1 trillion and $1.5 trillion to our budget deficits in ten years, and deficits will continue after that at a similar rate.  That borrowed money will be given to corporations and the wealthiest 1 percent of Americans in the form of tax cuts.  Every American will be obligated to repay the debt.

There’s no way to make a sensible budget from the revenue that will remain after the tax cuts.  Social Security is self-funded by employee and employer contributions.  It will remain totally self-sufficient through 2036.  It needs a bit more revenue or lower expenses to be solvent past that date but its problems seem minor.   The crisis is in the rest of the budget.

Republicans have pledged to increase spending or hold it steady for defense, Medicare, and Medicaid/Health programs.  Their tax bill does not produce enough non-social security revenue to pay for anything else after keeping those promises and paying interest on the national debt.   Yes, you read it right.  They have promised to spend all federal tax revenue on defense, Medicare, Medicaid/Health and interest expense.  Did they do the math before they made the promises?

The Republican plan cuts taxes so much that there is no sensible financial path forward, just a mountain of debt.  The light that they claim to see at the end of the tunnel is a train; and it’s headed our way.

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