the national interest

Republicans Didn’t Reform the Tax Code. They Never Wanted To.

Photo: Bachrach/Getty Images

Republicans have bitterly complained that their plan to cut taxes for business owners and estate heirs is only unpopular because the liberal media has smeared it. “Your job is to use the Democrats’ talking points,” grumbled Mitch McConnell to reporters last night. It is certainly true that the news media has reported in fairly blunt terms on sweetheart deals and massive benefits for the wealthy in the new law. (Republicans haven’t helped themselves by repeatedly confessing that they are following the dictates of their donors.)

Yet there is one way in which the mainstream news media has gullibly regurgitated Republican talking points. The basic framing of the story has accepted the premise that Republicans have carried out a root-and-branch overhaul of the tax system. It is “the most sweeping tax rewrite in decades” (New York Times) or “the most sweeping rewrite of the nation’s tax laws in more than three decades” (Washington Post).

One thing you might notice about this framing is that it wipes away from memory the 2001 and 2003 Bush tax cuts. Those were of approximately equal scale to the Trump tax cuts, and were greeted on the right with the same theologically ecstatic certainty that a dawn of supply-side nirvana was at hand. The Bush tax cuts instead produced a historically mediocre recovery, itself propped up by an enormous housing bubble, culminating in a financial crisis.

For all their political baggage, Republicans have enjoyed remarkable success at escaping the stink of failure from the Bush years. They foisted responsibility for the great recession, and even the financial bailout signed by George W. Bush, onto Barack Obama. And now they have treated massive regressive tax-cutting as a novel experiment that hasn’t been tried since the 1980s, rather than the exact same thing they did last time they had power.

One might counter that this tax cut is a “reform,” while the last one was just a cut. But this fails to withstand even casual analysis. The new tax cuts remove few sources of favoritism and complexity, and add a great many. “The complex rules proposed in the House and Senate bills will allow new tax games and planning opportunities for well-advised taxpayers,” conclude 13 distinguished tax lawyers. As a result of the tax cut’s passage, stock in H&R Block has soared.

Republicans very well could have signed a true, Reagan-style tax reform if they had so desired. The 1986 tax reform was distributionally neutral (indeed, the rich got a slight tax increase) and revenue neutral. That’s why it attracted bipartisan support at the time. This time around, Democrats signaled their willingness to work with the majority on a tax bill that followed the 1986 model: a reform that paid for its rate cuts by eliminating preferences.

Perhaps one important clue about the party’s disposition toward Reagan-style tax reform could be found by excavating the positions of Donald J. Trump. Bitter opposition to the 1986 Tax Reform Act — which wiped out real-estate loopholes from which he personally benefited — is one of Trump’s most consistent beliefs. In 1999, Trump wrote a Wall Street Journal op-ed railing against the Reagan tax reform, which he called “one of the worst ideas in recent history” and “an offense against the working man” that “sent the real-estate markets through the windshield.” (Perhaps not coincidentally, the Trump version delivers enormous favors to the real-estate industry.)

Even as they wrapped themselves in the banner of Reagan-style reform, Republicans had no intention of replicating its goals. The New York Times’ report on the genesis of the tax cut explains that Republicans decided not to work with Democrats after the Dems sent a letter outlining their criteria. “Republican leaders talked seriously about working across the aisle,” reports the New York Times, “but when Democratic senators sent a letter last summer with strict conditions for working with them, it was clear that Republicans would have to proceed on their own.”

The Times does not say what the “strict” conditions of this letter entailed; there were only three. One was procedural: they wanted Republicans to use regular order — like the 1986 Tax Reform Act had — rather than budget reconciliation. Since the only point of using budget reconciliation was to enable Republicans not to work with Democrats, the requirement was axiomatic. Democrats would vote with Republicans if Republicans relied on their votes.

The other two “strict” conditions were that the bill not increase the deficit, and also not shift the tax burden from the rich to the middle class. Again, these conditions followed the precedent of the 1986 tax reform. What’s more, they were things Republicans themselves promised. Republicans repeatedly said their plan would not increase the deficit. (Mitch McConnell, May 16: “It will have to be revenue neutral.”) And Republicans also repeatedly promised their plan would cut taxes on the middle class and raise them on rich people who had benefited from special preferences. “The objective of the president is that rich people don’t get tax cuts,” said Treasury Secretary Steve Mnuchin. Yet Republicans ruled out writing a bill premised on their fulfilling their own supposed goals.

The reason they rejected this offer of bipartisan support, of course, is that Republicans were lying about their intentions. They did not want a Reagan-style reform. They wanted a tax cut for the rich, and considered “tax reform” to be a more palatable branding device. Reagan-style tax reform sounds better than Bush-style tax cuts. But Bush-style tax cuts is what we have.

The GOP Didn’t Reform the Tax Code. They Never Wanted To.