The Republican Party finally has a tax plan. Before Tuesday night, every GOP tax “reform” blueprint, framework, and bill had been a fantasy — because not a single one was mathematically viable in the Senate.
Due to the upper chamber’s arcane rules, Republicans can’t get their tax cuts out of the Senate — without Democratic help — unless their bill adds $0 to the deficit in the second decade after it’s passed. As of yesterday afternoon, Mitch McConnell’s tax plan appeared to put roughly $2 trillion on the national credit card between 2028 and 2038. And still, several members of his caucus were complaining that the bill did not cut taxes nearly enough.
So, it was difficult to see how Republicans could possibly solve their math problem without creating a fatal, political one. But last night, Orrin Hatch took a hatchet to his party’s tax legislation, and ended up achieving the seemingly impossible: The Utah senator found a way to keep the plan’s giant corporate tax cuts permanent, make its middle-class tax cuts more generous (in the near term), and cut the overall cost of tax package to $0 in 2028.
Hatch’s trick: Phase out (virtually) every tax cut that doesn’t benefit corporations in 2026, while also throwing 13 million people off of health insurance. The upshot of this is that, next year, almost no middle-income families lose out from the bill, and most upper-middle-class households come out ahead.
But, when the clock strikes midnight on January 1, 2026, the middle-class tax cuts turn into a pumpkin — and President Trump’s tax plan becomes a giveaway to corporations funded by raising taxes on virtually everyone in the United States.
Hatch made the GOP plan more appealing to the middle class in the near term, by doubling the child tax credit from $1,000 to $2,000. But that benefit expires in 2026, along with plan’s reductions in individual tax rates, and its doubling of the standard deduction. Even the rich would take a hit that year, as the bill’s cuts to the estate tax and to pass-through businesses (limited liability companies and partnerships like the Trump Organization) would also expire. And once those elements are gone, all that remains is a tax code that’s a bit less generous to individuals (who will have access to fewer deductions than they do currently) and vastly more generous for corporations.
That trade-off still leaves a small hole in the budget. But by repealing Obamacare’s individual mandate, the plan reduces the number of Americans who will seek out health insurance this decade by 13 million — and thus, reduces the amount the government will need to spend on insurance subsidies by more than $300 billion.
There’s a lot that’s clever in Hatch’s gambit. The GOP’s bet is that no administration — be it Democratic or Republican — will allow middle-class tax cuts to expire on its watch. This was one lesson of the Bush tax cuts. To comply with the rules of budget reconciliation (the special process that allows Senate majorities to pass legislation without overcoming a filibuster), Republicans scheduled George W. Bush’s tax cuts to sunset after ten years. But the Obama administration decided to make them permanent anyway — except for the cuts that benefited the wealthiest people in the country.
So, this time around, Republicans have opted to make the popular parts of their plan temporary — on the assumption that they won’t actually be — while they’ve made the unpopular part of their plan permanent.
There were other factors that produced this arrangement. The (discredited) economic theory that justifies the GOP’s giant corporate cuts doesn’t hold for temporary ones. And, ultimately, the cost of making those cuts permanent forced Republicans to phase out many parts of their plan that they can’t trust Democrats to preserve. It’s unlikely that President Kamala Harris would feel compelled to renew cuts to the estate tax or limited liability corporations.
Nonetheless, Republicans have made the best of a difficult hand. The GOP does not have the votes to pass major spending cuts, or to enact legislation that increases the deficit in the long term. But the party is ideologically — and financially — obligated to cut taxes on big business and the rich. These constraints left the party with one, politically toxic option: Give the donors a return on their investment by raising taxes on the middle class. By passing a combination of large — but temporary — middle-class tax cuts, and small — but permanent — middle-class tax hikes, the GOP might have found a politically viable way to do this.
The key word there is might. In their messaging, Republicans have been adamant that cutting taxes on the middle class is their top priority. Now, they’ve unveiled a plan that vividly contradicts that claim. The party could have made its corporate cuts temporary and individual cuts permanent. There might have been sound political and economic reasons for doing the opposite. But voters are unlikely to find them compelling.
Despite the GOP’s assurances, the vast majority of Americans do not think that they have anything to gain from corporate tax cuts. A SurveyMonkey poll released this week found that 78 percent of Americans — including roughly 70 percent of Republicans — don’t believe that a tax cut on their employers would result in a paycheck increase for them.
The new GOP plan is likely to have some problems in the House. The Hatch bill eliminates the state-and-local tax deduction, even though blue-state Republican House members have been promised that the deduction would survive in a modified form. It could also have trouble in the Senate. Susan Collins, Lisa Murkowski, and John McCain weren’t comfortable (partially) repealing Obamacare last summer. Now, they’re being asked to do so while also, technically, voting to raise taxes on the middle class.
Republicans have solved their math problem — and, simultaneously, made their political problems more formidable. But McConnell will surely take that trade-off. The laws of arithmetic don’t cave in the face of donor pressure — but moderate Republicans might.