the national interest

Republicans: We’re Trying Not to Cut Taxes for the Rich, But It’s Too Hard

Steve Mnuchin’s strenuous efforts to avoid giving rich people a gigantic tax cuts are falling short.

At the beginning of the year, Treasury Secretary Steve Mnuchin promised that the Trump administration’s tax cuts would not deliver a net benefit to the rich. Since then, Republican leaders have unveiled a series of progressively more detailed frameworks that betray an unmistakable intent to do just that. And so the defense is slowly evolving into a sense of resignation. “The top 20 percent of the people pay 95 percent of the taxes. The top 10 percent of the people pay 81 percent of the taxes,” Mnuchin tells Ben White. “So when you’re cutting taxes across the board, it’s very hard not to give tax cuts to the wealthy with tax cuts to the middle class. The math, given how much you are collecting, is just hard to do.”

News accounts have credulously accepted the premise that Republicans don’t want to deliver a tax cut to the rich, but it’s just so darn hard to avoid. The Washington Post, listing the “hurdles” in the way of passing a plan, notes, “they haven’t sorted out how to ensure that the majority of any tax cuts don’t benefit primarily the wealthy.” Apparently not giving rich people a huge tax cut is a technical problem our best minds have yet to crack.

It is in fact very possible to design such a plan. Ronald Reagan signed a bipartisan tax reform in 1986 that increased the net tax burden on the rich. In 2014, retiring Republican Ways & Means Committee chairman Dave Camp proposed a tax-reform plan that did not give the rich a net tax cut. But Republicans rejected Camp’s plan immediately because it did not give the rich a net tax cut. And Mitch McConnell refuses to work with Democrats who support tax reform as long as it does not give rich people a tax cut. Cutting taxes for the rich is the party’s goal.

It is possible to reform the tax code without passing a net tax cut. And it is possible to enact a net tax cut without cutting taxes for the rich. There are many taxes in the federal tax code. Mnuchin’s figures about how much the rich pay in taxes ignores the payroll tax (which is the FICA tax on your paycheck), which for most workers is the largest tax. Republicans could offset some of the regressive burden of the payroll tax if they wanted. Instead, they are choosing to cut the portions of the tax code that fall most heavily on the rich: income taxes to some extent, but also the corporate income tax (which is borne mostly by people who own those corporations) and the estate tax, which is borne exclusively by heirs to estates worth more than $5.5 million per parent.

After explaining the insurmountable difficulty of not cutting taxes for the rich, Mnuchin tells White that they are eliminating the estate tax because, “The estate tax is somewhat of an economic issue and somewhat of a philosophical issue. People pay taxes once. Why should people have to pay taxes again when they die?”

It’s especially hard not to cut taxes for the rich when you are working within the constraints of a philosophy that says heirs to large estates should not pay any tax.

Republicans: Not Cutting Taxes for the Rich is Too Hard