DI Politics Chat: The GOP Got Their Tax Cuts. Now What?

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Photo: Jabin Botsford/The Washington Post

This week, Paul Ryan achieved his life’s dream of passing a gigantic tax cut, Donald Trump got to emblazon his weird-looking signature on a significant piece of legislation, and the entire GOP was able to fulfilled their long-standing principle that whenever you’ve got the chance to fork over an enormous amount of money to rich people, you’ve gotta do it. Four Daily Intel staffers chatted about the policy implications and the political ramifications of the tax bill’s passage.

Ezekiel: So the GOP passed their tax plan. Immediate, ill-considered, knee-jerk reaction?

Ed: It’s what Republicans do.

Jon: Yes, I priced this in since Election Night.

Ed: And while it’s wildly regressive and destructive, they did work a few actual reform ideas into the mix.

Eric: There was a little while there when it looked like they might snatch defeat from the jaws of victory. I had a hard time understanding how they were going to make the math add up for a good while — didn’t realize they were prepared to write a long-term tax hike on the middle class to make it work.

Jon: I thought they would pass something, though I did think the current bill would fall apart before they recovered.

Ed: The whole repeal-the-individual-cuts-in-2025 thing has made debating this bill impossible. Most of the really regressive analyses take the repeal literally. Republicans assume they are entirely imaginary. The truth is somewhere in between.

Jon: By the way, my wife read our last chat, and her feedback was, “Everybody else writes complete thoughts, but you just speak in cryptic fragments.” I am literally her least favorite chatter here, it seems. So I am going to take it to heart and try to write with less brevity. Anyway.

Ezekiel: I like the cryptic fragments.

Ed: “Cryptic fragments” — another great indie band name.

Eric: Anyhow, as someone who doesn’t think the deficit matters very much — and that Republicans (probably) don’t have the votes to rip apart the safety net next year — I’ve taken this development in stride. The individual mandate repeal is bad; the implications of this legislation for inequality, concerning; and the contempt for democracy that pervaded the whole process, dispiriting. But if this is the only major legislative damage they get done before (knock on wood) Democrats take back one house of Congress next year, I think we’ll have done pretty well

Jon: The judges and the carbon emissions, in that order, concern me more. But, yes, tax cuts for the rich are very reversible, and for corporations, even more so.

Ed: As someone who thought on Election Night 2016 that the trifecta meant a blizzard of really bad legislation, I agree with Eric.

Ezekiel: So if the Dems sweep into power next year, what should they keep from this plan?

Jon: The pen it was signed with. [Cryptic fragment again!]

Ed: The move away from real-estate subsidies, definitely.

Eric: Yeah, limiting the mortgage interest deduction is good.

Ed: Probably the general shift away from reasons to itemize.

Jon: Yes, also the chained indexation of brackets is a long term middle-class tax hike that will be helpful, and would be hard to pass.

Eric: Yeah. And the statutory corporate rate probably should be lower than 35 percent. I could also see an argument for keeping that rate close to where it is now, while raising taxes significantly on capital gains.

Jon: But other than that, what have the Trump tax cuts done for us?

Ezekiel: I like the expansion of the child credit.

Ed: Yeah, though the child tax credit should be 100 percent refundable.

Eric: Yeah. Although, they took it away from some undocumented people, I think. I believe they introduced a new requirement to provide the Social Security numbers of the children your taking the credit for.

Ezekiel: I did not realize that.

Eric: Yeah: “Currently, non-citizens filing taxes using an Individual Taxpayer Identification Number, or ITIN, are allowed to claim the child tax credit, which gives back up to $1,000 per child under age 17 …

Under both the House and Senate versions of the Republican tax bill, ITIN filers — most of whom are undocumented — would need to provide Social Security numbers for each child in order to claim the refundable part of the credit …”

Jon: It’s reminiscent of how Democrats used the Bush tax cuts. Republicans had to include lots of benefits for middle-class and working-class people to sell the part they wanted, the tax cuts for the rich. So Democrats kept the former and eliminated the latter when the Bush tax cuts partially expired. It’s a winning formula. the only problem is that you lose revenue you need from the middle class.

Ezekiel: That req should be scrapped.

Eric: Yeah, though seems like the kind of thing that will be hard for Dems to undo. Or, at least, that will invite the kind of political blowback that normally spooks centrist Dems.

Ed: Jon — the Bush cuts, however, were more centered on straightforward rate cuts than this bill, right? Much easier to sort into upper-class/middle-class baskets.

Jon: Restoring the estate tax and corporate tax rates, or higher capital gains rates as a substitute, is pretty straightforward. The old problem in Democratic politics, circa 2016, was that there wasn’t enough money in taxing the rich to fund everything Democrats wanted. That is much less true now.

Eric: Yep. That is the big benefit of this tax bill — a multitrillion-dollar pot of popular pay-fors that Democrats can use for universal child care, paid family leave, a strong public option, or what-have-you.

Jon: Big picture, the GOP had total control of government, and they blew their one big legislative push on a measure that’s reversible and will cost them politically. Wasn’t that a bad move?

Ezekiel: Well, that was my next question — is it going to cost them politically?

Jon: It’s really unpopular, polling at or below Trump’s approval rating, which is low.

Eric: Well, but in Jon’s framing: I think there is no question that it will cost them politically, relative to where they could have been if they’d passed a bipartisan infrastructure bill or a massive emergency package for the opioids crisis.

Jon: My argument is that this will help cement the best Democratic theme, which is the connection between normal Republican plutocracy and Trumpian corruption.

Ed: I’d argue a major source of its unpopularity is simply that Republicans wrote it, and they are unpopular.

Eric: Whether it will cost them politically to have passed this bill — as opposed to spending all year trying and then failing — is a more difficult question. But I don’t think there’s any doubt that pursuing Ryanism has had a cost.

Jon: I think a bill playing even slightly against type — closing the carried interest loophole, a tiny top rate increase — would have played very differently. They could have still given the rich a big tax cut, but a few concessions would have made it go down much better. They were too greedy.

Ed: I think the unpopularity of the bill will abate a fair amount when regular folks realize they will benefit from it. But there should have been more “playing against type,” as Jon suggests. Lowering the top rate at the very end was stupid.

Eric: Will they realize though? Most people didn’t notice that tax cut they received from the 2009 stimulus, in my understanding.

Ezekiel: The tax cut in the 2009 stimulus was intentionally downplayed, because they were afraid emphasizing it would mean people would realize it was temporary and not spend the money.

Ed: They’ll notice that the standard deduction doubles.

Eric: They’ll notice that next year?

Ed: Withholding will be adjusted in February, I believe.

Eric: Mm.

Ed: Most people will notice that.

Ezekiel: Noted resistance leader Joe Walsh suggested that the Democrats run on “the Republicans passed a permanent tax cut for corporations and a temporary tax cut for you.” Good message for the Dems?

Ed: Republicans will just deny it, and start mumbling about budget rules. But for people who are already suspicious of Republicans, it’s an okay talking point.

Jon: People don’t trust the government in general or Republicans in relation to helping corporations versus the middle class.

Eric: I think “Trump is a con artist stealing from taxpayers to feather his nest and those of his weird family — and Republicans are the same, only a bit more subtle about it” is a pretty solid message. Except, you know, boiled down to way less words.

Ed: For the very reason that people don’t trust “government in general,” I’m not totally convinced the unpopularity of the tax bill will hurt Republicans specifically and independently of their general unpopularity as a party.

Jon: Boiling it down to way less words is my gig, Eric. Cryptic fragments are what move voters.

Eric: You think their general unpopularity as a party is unconnected to dissatisfaction with their agenda?

Ed: No, it’s not “unconnected,” but it’s a lot more general and indirect than a lot of people seem to think. Maybe this tax bill will reinforce GOP unpopularity among certain segments of voters, but I don’t think it’s going to benefit or hurt them that much in the short run, with ONE EXCEPTION: the SALT deduction limitation could definitely lose Republicans close House races in New York, New Jersey, and California.

They were smart to adjust the SALT thing at the last minute, but it’s still damaging to upper-middle-class voters in high-tax states.

Ezekiel: Does the tax cut help the Republicans take credit for the growing economy? A recent poll suggests that most voters still think Obama is responsible for the present economy.

Jon: That’s a good point, Ezekiel. I think it might. If there’s a recession, they’re screwed, but that’s probably true regardless.

Eric: If people do notice that they get a tax cut — after previously believing that they wouldn’t (on the basis of Democratic rhetoric) — why won’t that benefit the GOP in the short run?

Ed: Well, voters, like human beings generally, are vulnerable to the Post Hoc Ergo Propter Hoc (after this, thus because of this) logical fallacy. But if the economy keeps buzzing along the GOP’s going to benefit no matter what they do or don’t do. But sure, a combo platter of a good economy and a tangible tax cut for oneself would be good for the GOP.

Ezekiel: Let’s imagine that the Democrats don’t manage to take back either the House or the Senate in 2018. Does your evaluation of this bill’s impact change? How?

Ed: No. Democrats ain’t repealing anything unless they, too, have a trifecta. A continued GOP trifecta going into 2020 might be better for Democrats’ prospects in 2020. But tax policy isn’t the reason a Dem midterm win is critical.

Jon: As policy, what matters is if Democrats take control of the trifecta by the 2020 elections.

Eric: If Republicans pass a bill this regressive and unpopular – and pay no significant political penalty – I think that establishes a scary precedent, one that could embolden the party to take knives to entitlements.

Jon: Yeah, if they keep the trifecta after 2018, they could get very ambitious the next term.

Eric: Also, as Ed is alluding to (I think), 2018 is critical for redistricting.

Ed: And also the SCOTUS, regulations, appropriations.

Eric: Right.

Ed: I wrote just today about the split within the GOP (and probably the Dem party as well) between those who want to use power to perpetuate power and those who want to achieve ideological goals. That split could become acute if Republicans hang onto Congress next year.

Ezekiel: Great. That’s why I asked that last question. End the chat on a happy note. Any other closing thoughts?

Also, as Ed is alluding to (I think), 2018 is critical for redistricting I’m ready for an end to Republicans “celebrating” this bill.

Jon: I’m enjoying the celebrations. ’Tis the season, but also it’s great material to replay when the parts they care about get rolled back.

Ed: You do play the long revenge game.

DI Politics Chat: The GOP Got Their Tax Cuts. Now What?