News & Politics

Republicans Get Their Tax-Cut Holy Grail: Is It Poisoned?

Republicans believe tax cuts will save them in 2018. They may have driven away affluent suburban whites for good.

Photo Credit: Gage Skidmore / Flickr

So the Republicans had their first really good day all year on Wednesday. They finally passed "tax reform," the GOP Holy Grail, magically imbued with "powers that will provide happiness, eternal youth or sustenance in infinite abundance." Indeed, for as long as I can remember, tax cuts have been their answer no matter what the question. If the country is flush, Republicans insist that taxes have to be cut, because, as George W. Bush said repeatedly, "it's your money!" When the economy crashed a few years later, once again tax cuts were prescribed. In good times and bad, war and peace, growth and recession, cutting taxes is at the very top of the GOP agenda.

Considering their obsession with tax cuts for all occasions, one might have thought they would have had several proposals they could pull off the shelf once they had full control of the government. Certainly they managed in the past to put together a plan that at least appeared to cut more taxes for the middle class than the vastly wealthy and didn't add trillions to the deficit. They held hearings and spoke to experts and even got some Democrats on board so they could call it bipartisan. Yes, it was mostly phony, with tax cuts sunsetting in the out years so they could pretend the whole thing was fiscally responsible. But they adhered to congressional rules and used a common set of numbers and assumptions that everyone could agree upon.

I suppose it should come as no surprise that in the age of Donald Trump, they seemed to have no idea what they were doing. Congressional leaders rushed out a piece of legislation that makes little sense on either a political or an economic level. It does reward Republican donors, Donald Trump and his family and many members of Congress personally, so in that respect it's a big win. But its effect on the rest of the country is at best a small, insubstantial payout and at worst a tax hike.

For all the Republican promises of the last four decades about simplifying the tax code so we could all file on a postcard, this thing is best described as the professional tax preparer's job security act. Even the experts aren't exactly sure how it works, and Trump and the Congress are in a big hurry to get the whole thing enacted before they figure it out. So who knows what kind of chaos we'll be dealing with in the next year?

The reason for the big rush is just as delusional as the idea that the bill is going to create 5 percent growth: Republicans believe that the minute people see an extra few bucks in their paycheck, their approval ratings are going to go through the roof. Most of them are multimillionaires and obviously have no clue how people live in 2017. Recall this comment from Trump economic adviser Gary Cohn:

If we allow a family to keep another thousand dollars of their income, what does that mean? They can renovate their kitchen, they can buy a new car, they can take their family on vacation, they can increase their lifestyle . . .

How far back in time do you have to go to buy a new car for a thousand bucks? I can answer that. You'd have to go all the way back to 1922, when a Studebaker Light Six model cost just under that amount.

They truly seem to believe that these minor tax cuts are going to thrill people so much that the Donald Trump White House of Horrors presidency will be erased and they will sail to victory in 2018. They should have taken a look back at Barack Obama's experience. He delivered tax cuts in 2009 as part of the stimulus program. And the people famously delivered him a "shellacking" in 2010. By the way, unlike Donald Trump, who sits as low as 32 percent approval in some polls, Obama was at the low point of his presidency -- at 45 percent.

Many middle-class people will see a small change in their paychecks, and the very wealthy will get a tremendous windfall, which undoubtedly makes them very happy. But there is another group that is going to see some very unpleasant results from their tax hike: college-educated folks earning $80,000 to $250,000 in urban areas and wealthy suburbs. Tens of millions of upper middle-class people in those areas will see major tax increases from the changes in home mortgage deductions and local sales taxes.

Many of these people also happen to be traditional Republicans, some of whom have been moving toward the Democrats on social issues but have largely stuck with the GOP on economics. Some are fiscal conservatives who worry about deficits. This plan hikes the deficit by somewhere in the vicinity of $1.5 trillion, and these Republicans are shrugging their shoulders saying "don't worry be happy." Other members of this professional class have just always figured they'd personally do better under Republicans.

These are not people who are unaware of the complexity of taxes. They are the ones who will be hiring all those accountants, who will tell them that nobody has a clue what's going to happen from year to year with this thing -- the volatility built into this slapped-together plan is one of its most stunningly ill-thought-out features -- and deliver the bad news about how much money they just lost so the very rich can hog even more of the nation's wealth for themselves.

Bloomberg reported on Wednesday that even some of Trump's Wall Street fans who were eagerly awaiting the tax cuts are dismayed to find out that billionaires are going to reap most of the benefits, and they are going to lose money:

Atop their list of worries: New limits on deductions for mortgage interest and state and local taxes -- relatively high throughout New York, New Jersey and Connecticut -- will cost them thousands of dollars annually while depressing the value of their homes. That would chop local tax revenues and erode the quality of schools and other amenities traders expect for their families.

This will affect other upper middle-class families in expensive suburbs, even in states like Texas and Florida. Perversely enough, it could affect the handful of Republican lawmakers who voted against the bill, many of whom represent these upper middle-class suburbs, even more than those who voted for it. They were already weakened and vulnerable, and knew what this bill was going to do to their constituents. They will pay for their party's sins nonetheless.

The Republicans got their tax-cut Holy Grail. But in the process they exacerbated their most challenging demographic crisis: Their growing estrangement with white, college educated voters in the upper middle-class. There aren't enough billionaires and white working-class Trump fans in this country to save them.

 

Heather Digby Parton, also known as "Digby," is a contributing writer to Salon. She was the winner of the 2014 Hillman Prize for Opinion and Analysis Journalism.

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