Victims of Their Own Success
Laura Blessing | December 21, 2017
The Republican Party has become a victim of its own success. Given their legislative, administrative, and impending electoral challenges, this may sound odd. But on their biggest policy priority, tax policy, they may have been too successful. And those previous successes combined with the tax bill passed this week may just imperil their reputation as the tax cutting party.
Tax policy is the beating heart of Republican politics. Tax cuts, particularly to top marginal rates, are their most prized and consistent issue. Whatever your personal policy preferences, they represent admirable small-d democratic accountability: given the chance to cut taxes, they do. They make voters a promise, and they deliver.
But after a generation of tax-cutting, they are testing the limits of tax policy as a party-building issue. Republicans have long fashioned tax-cutting rhetoric to embrace many Americans, including the poor and middle class. They’ve succeeded in reducing the number of Americans paying progressive tax rates, lessening the appeal of further such GOP-style cuts. Republicans have been so successful at cutting taxes that they’ve structurally shrunk government revenues, making additional cuts more painful for spending priorities and deficits.
Usually, bills that cut taxes poll well. One can certainly quibble about what Americans really value—polls reveal Americans to favor lower taxes, more spending, and reducing deficits—fuzzy math, to say the least. Yet the current tax cut proposal is broadly unpopular except for Republican voters, a majority of whom nonetheless oppose the corporate tax cut at the center of the bill. This is a new development, and not one that bodes well electorally for the GOP, as tax bills don’t typically improve over time in the public view.
The current Republican tax plan is also needlessly self-defeating. While the tax bill includes many long-held Republican priorities (cuts to top marginal rates and the estate tax, not taxing American multinationals’ profits abroad, the reduction of the state and local tax exemption, etc.), a bill with conservative bona fides that would not invite the sort of backlash this one promises could easily be fashioned. Smaller rate reductions, and more benefits targeted to the poor and middle class, would check Republican boxes while broadening support. Instead, the biggest takeaway of the bill is that large, permanent corporate tax cuts and temporary individual tax cuts that disproportionately benefit the wealthiest will cost $1.5 trillion over the next ten years.
Another problem is that the bill eliminates the Affordable Care Act mandate, which the CBO projects to reduce the number of insured Americans by 13 million and save the federal government $338 billion over ten years. Typically tax legislation does not require viewing the cost of tax cuts as a corresponding loss of other opportunities, especially for the social safety net. The notion of people losing health care to pay for tax cuts to wealthy interests is visceral.
Finally, this is rushed legislation. Both parties have strayed from the traditional, more deliberative, legislative process, called “regular order” on Capitol Hill—but this blitzkrieg goes further. True tax reform typically takes two to three years. This bill is on track to become law less than two months after its introduction, and without administration testimony or the extensive legislative hearings and mark-ups that typically accompany major legislation. This speed has a price: both craftsmanship and champions. Thirteen tax professionals published a paper warning of ways the sloppily drafted bill could be gamed, and the chair of the House tax-writing committee acknowledges that correcting legislation will be needed.
Meanwhile, Democrats have been shut out of the process from the outset. Historically, Democrats have only opposed the largest revenue-losing bills, with gains disproportionately to the wealthy, often voting in large numbers for other tax cuts. It should have been possible to get Democratic votes here as well. This bill narrows its support further with the reduction of the state and local tax (SALT) deduction, which hurts blue state Republicans whose constituents will suffer from that change.
Not only are the above tax plan characteristics problematic, but the policy itself is may have other effects, from larger deficits and the likely limits on government spending, to potential impacts on inequality and international trade. Congressional Republicans have long hoped for the opportunity to put their policy priorities in place, and they are celebrating today. In the process, however, they may have reduced the popularity and coalition-building capacity of their signature policy issue.