Las Vegas Sun

March 29, 2024

GOP backed its way into unpopular tax bill

The Republican Party seems to have backed itself into a corner on tax policy.

After the failure of their health care plan, President Donald Trump and congressional leaders have understandably decided that they need a win. If they somehow fail to pass a tax cut, they will anger their base and their donors and look incompetent to swing voters.

But the actual bill that the House passed this month — and the modestly different plan the Senate is considering — is a dreadful piece of policy. It would cause the deficit to soar and, as a result, probably reduce economic growth. It would also raise taxes for millions of middle-class families.

And most Americans realize that the tax plan is dreadful. Only 16 percent of adults said they thought the plan would reduce their own taxes, according to a Quinnipiac poll released the week before last. On the same day the poll came out, several Republican senators criticized the plan, which suggests it may be in jeopardy.

There is no easy way out for the party at this point. In coming days, Senate leaders will probably claim to take steps to fix the House bill’s flaws. But they won’t be able to, absent a complete rewriting. The core of the plan is the problem.

How did Republicans do this to themselves?

Above all, they refused to heed the lessons of 2016 — of Trump’s shocking romp through the primaries and even more shocking general-election win. In a time of deep economic dissatisfaction, among members of both parties, Republican leaders insisted on basing their plan around an enormous tax cut for the wealthy. Doing so pleased their donors and trickle-down true believers, but it is worth pausing for a moment on the cynicism of the plan. In substance, it is almost the direct opposite of the party’s middle-class rhetoric.

“The GOP,” Henry Olsen, a conservative policy expert, recently said, “really wants to do nothing other than cut taxes for businesspeople and the top bracket based on what can only be called religious devotion to supply-side theory.”

Once Republican leaders filled their plan with tax cuts for the wealthy, they didn’t have much money left for the middle class. In the Senate, Republicans were so desperate to find money that they released a new version of the bill that made virtually all of the middle-class tax cuts temporary. They expire before the bill’s final year, 2027.

An assortment of middle-class tax increases — again, to help cover the cost of the tax cuts for the wealthy — last for the full life of the Senate bill. As a result, it ends up being a tax increase on households making less than $75,000, according to the only rigorous analysis so far, by the Senate’s Joint Committee on Taxation. For families making somewhat more than $75,000, the tax cut is modest and likely temporary, given the deficit. The plan, says Martin Sullivan, chief economist at Tax Analysts, a highly regarded research group, has “stunningly meager tax benefits for middle class.”

The best hope for stopping the bill is the handful of Republicans willing to think beyond raw partisanship. They include Susan Collins and John McCain, who helped defeat the health bill, and Bob Corker and Jeff Flake, who aren’t running for re-election and consider themselves fiscal conservatives. (Ron Johnson, of Wisconsin, has come out against the bill, although he did the same on the health care bill, before flip-flopping.)

True, another failed attempt at major legislation would be a big political problem for the Republicans. But passing a hastily written, deficit-busting bill that harms the middle class would not be great, either. It’s impossible for these senators to solve their party’s political troubles. They may as well do the right thing.

David Leonhardt is a columnist for The New York Times.