The GOP Has Done the Impossible: Make Tax Cuts Unpopular

By
Paul Ryan at a tax-reform press conference. Photo: Andrew Harrer/Bloomberg via Getty Images

The other night at dinner, I was explaining to my kids how the Republican agenda in Washington has settled into a familiar groove of manic tax-cutting for the rich. The House, Senate, and White House are united in their determination to deeply reduce taxes on corporations, partially or completely eliminate the tax on inherited estates of more than $11 million, give business owners a special low rate, as well as administer other comforts for the comfortable that we liberals see as unlikely to help anybody other than their direct beneficiaries. The news made them glum. My daughter, seeking some solace, and having been repeatedly impressed that our family has it better than most of our fellow Americans, suggested, “But at least we’ll get a tax cut, too, right?” I brightened for a moment and then realized we’re a household with kids that pays state income-tax rates, and told her, “Uh, actually, we’re probably going to pay more.”

There was a time when liberal professionals, watching in horror as Republican presidents drove the federal budget into a ditch, could at least count on the semi-guilty consolation of a tax break. And I would indeed be happy to have my tax rate raised for the purpose of reducing the deficit or funding important social needs. But the prospect of paying higher taxes in order to finance gigantic tax cuts for much richer people is a novel misery. The comprehensive awfulness of the Trump administration has extended into new terrain.

The Republican government seems hell-bent on this course. When suburban voters in Virginia registered their fury with the majority party earlier this month, with waves of voters in the Washington suburbs giving Democrats shockingly large margins, Republicans in Congress drew the conclusion that voters were impatient for the tax plan to pass. The election result “doesn’t change my reading of the current moment,” a chipper House Speaker Paul Ryan explained. “It just emphasizes my reading of the current moment, which is: We have a promise to keep, and we have to get on with keeping our promise.” Senator Rob Portman agreed: “I think the lesson is: Let’s get some things done.” Josh Holmes, a former chief of staff to Senate Majority Leader Mitch McConnell, called the election result “a reaction to what’s not being done and a warning sign that they need to move. They don’t have any choice but to do the tax plan.”

It’s hardly surprising that the Republicans are applying their solution to every problem (recession, inflation, wartime, high budget deficit, high budget surplus) to this particular problem. The perverse thing is that this version of a regressive tax cut comes attached to proposals to inflict pain upon the very constituents who are turning against them. The House Republican tax plan would raise taxes on a quarter of all households, including almost half of all middle-class families. It is especially brutal to middle- and upper-middle-class taxpayers in blue states, because it would scale back the federal tax deduction for state and local income taxes. Republicans gleefully conceived of this feature as a scheme to screw over New York, New Jersey, and California (which have higher than average taxes) while raising revenue that they could plow back into corporate tax cuts. But it so happens that these states also contain some of the most politically vulnerable House Republicans. What they designed as an act of sadism turns out to be an act of masochism.

Republicans have insisted so many times that their majority depends on passing “tax reform” that news reporters have begun repeating it as though it were simple fact. “After the elections, Republicans understand they have to pass a tax bill in order to show a significant accomplishment,” the New York Times reports.

While it stands to reason voters might reward Republicans for passing some bills, there is no evidence they would reward them for passing this one. Trump’s tax-cut plan is unpopular in both its broad strokes and in its particulars. One recent poll found that one-third of the public support it and half oppose it. Sixty percent believe it favors the rich. Majorities of the public believe corporations and high-income individuals should pay more in taxes. They believe the Republican plan would do the opposite, and they’re right.

As a general rule, the longer Congress delves into the legislative morass on any issue, the more the public tends to dislike whatever it comes up with. This rule stands to be especially applicable to the tax plan. If Republicans want to pass a bill with a simple majority and they need to, since it would be hard to find eight Democratic senators eager to cut taxes on the rich — they need to structure it as a budget-reconciliation bill. But such bills have certain restrictions. The most pertinent one is that they cannot increase the budget deficit outside the time specified in the budget window, which is ten years.

The last big tax cuts, passed under George W. Bush in 2001, solved the problem by abruptly expiring nine years later. But Republicans don’t want to go through another heartbreaking experience of seeing their beloved tax cuts yanked away. They also want to cut corporate taxes, and even if those are temporary, they will cost the government money after the expiration date. (Corporations will shift their income into the low-tax years, meaning they will pay less tax even after the rate pops back up.)

Republicans’ initial solution to this problem was to replace the lost revenue from cutting the corporate income tax with a new tax on imports. Retailers like Walmart objected, and Republicans gave up. In its place they have … very little. Legislators went scrounging through the tax code looking for breaks that struck them as frivolous. They came up with such items as a tax credit to reimburse small businesses that need to create access for disabled employees, a tax credit for hiring veterans, the tuition waivers graduate students receive, and the tax credit for drug companies performing clinical tests for treatment of rare diseases — which, the Times explains, is “central to the business model for such firms and eliminating it could mean that big pharmaceutical companies will have little reason to invest in drugs that help small patient populations.”

All these savings will create deeply sympathetic victims who will be offering testimony in devastating political ads next year. And for their trouble, Republicans have scraped together barely any savings at all. They are raising taxes on nearly half the middle-class families in America, they are inflicting specific punishment on veterans, students, the disabled and very sick. And they still have no idea how to make the couple hundred billion dollars a year in lost revenue disappear after a decade is up.

For decades, economic-policy discussion in conservative circles has consisted of rote repetition of a cultlike mantra about the alleged miracle of the Reagan tax cuts, but there is nothing mystical about congressional Republicans’ motivations. Their donors seem especially intent on making Republican control of government count. If tax reform fails, Senator Lindsey Graham recently warned, “the financial contributions will stop.” Representative Chris Collins reported, “My donors are basically saying, ‘Get it done or don’t ever call me again.’ ”

Gary Cohn, the Trump economic adviser who has endured a series of public humiliations in order to have the chance to enact his vision, recently blurted out, “The most excited group out there are big CEOs, about our tax plan.” In a presidency marked by extravagant and continuous lies, it is strange to hear such blunt truths.

*This article appears in the November 13, 2017, issue of New York Magazine.

The GOP Has Done the Impossible: Make Tax Cuts Unpopular