“Tax reform is now an existential issue for House Speaker Ryan and Senate Leader McConnell,” assert Mike Allen and Jonathan Swan. “If they botch this, as they did health care, both chambers could lose their Republican majorities.” The notion that passing the tax cut will help the party in 2018 is the conventional wisdom, and it is what Republicans have been asserting for months. But not only is this false, it is increasingly obvious that many Republicans themselves do not believe it.
Asked by George Stephanopoulos if he can promise middle-class families won’t have to pay higher taxes under the plan, economic adviser Gary Cohn says, “I can’t guarantee anything.”
That is … not the message Republicans want to use to sell this plan. Unfortunately, it is true. Many middle-class families are certain to face tax increases to offset the cost of tax cuts for businesses, extremely wealthy heirs, and others.
While details of the plan remain sparse, one already-obvious source of fiscal pain is the plan to eliminate the federal tax deduction for state and local taxes. Republicans love this idea because it raises lots of revenue, and it hits only states that have state income taxes. (Penalizing states that raise revenue through the income tax encourages them to shift over to more regressive tax streams, a secondary benefit for the affluent.)
The downside, however, is that there are plenty of Republican members of Congress representing those states. The Wall Street Journal editorial page argues that those Republican members of Congress must be willing to make their constituencies take a tax increase for the greater good of reducing taxes for rich people elsewhere. “Members must hang tough on eliminating subsidies like the state and local tax deduction that underwrites high-tax states like California and New York,” the Journal implores. “This will be a rough political fight with GOP Members from Democratic states, but killing the deduction saves $1.25 trillion over 10 years that tax writers need to finance lower rates.”
And indeed, blue-state Republican members of Congress are so far willing to take one for the team. The plan is “so good on every front,” says New York congressman Chris Collins, that “it does not become a big deal” if some constituents get hit.
Blue-state districts, with high concentrations of college-educated white voters, are going to be the most vulnerable to a midterm wave. If Congress raises taxes on some of those constituents to finance tax cuts for the rich, it will make those seats all the more impossible to defend. On the other hand, many of those members already voted for the Republican Obamacare repeal plan, so they might assume they’re going to lose anyway, and might as well lay the groundwork for a lobbying career.