Cut Taxes or Die - The Republican Tax Bill is About Political Survival, Not Policy

 Kenneth T. Walsh

President Donald Trump and Republicans in Congress are aiming for one main objective as they push for a bill to cut taxes: a political victory. This has become more important to them than ideology, equity or consistency, and as a result any final bill is likely to be a testament to their desire for survival rather than legislation that will stand the test of time.

"At the end of the day, when all else fails, Republicans are expected to be able to cut taxes," says political scientist Bill Galston of the Brookings Institution, a former senior White House adviser to President Bill Clinton. "If they can't do that, why do they exist? ... This is do or die for them." Sen. Ron Johnson, R-Wis., a skeptic about the Senate bill, complains about the "awful, rushed process" and a "desperation to pass anything."

The Senate version of the tax bill is likely to come up for a vote in the next couple of weeks. The House passed its version in mid-November. Their approaches are substantially different, and it's unclear not only whether Senate Republicans, with their narrow 52-48 majority, can pass a major tax bill of their own but whether the House and Senate can resolve their differences in the end. The provisions are in flux, but the nonpartisan Tax Policy Center finds that the economic benefits to most middle-class households from the core GOP plan "would be modest because most tax reductions would accrue to high-income households."

Trump has mostly kept out of the legislative process, but when he has jumped into it he has confused matters, such as when he advocated a corporate tax rate that was lower than what the House and Senate were considering. He also has been unclear about other provisions, such as what rates the middle class should pay, what tax breaks should be preserved, added or deleted, and whether an effort should be made in the tax bill to dismantle key provisions of Obamacare, the health-care law enacted under Democratic President Barack Obama.

To many budget specialists of both parties, the president is over-promising. "We're going to give the American people a huge tax cut for Christmas – hopefully that will be a great, big , beautiful Christmas present," Trump said Monday before a Cabinet meeting at the White House. But Trump's promise only tells part of the story. Beyond the issues of tax rates and tax breaks, and whether they are permanent or temporary, there is the matter of the deficit. "Fiscal responsibility" used to be an article of faith and rallying cry among Republicans. Constantly calling for cuts in federal spending was a way for GOP conservatives to stand apart from Democratic liberals. The politicians of the right argued that they could be trusted to protect the taxpayers from over-spending and to keep the deficit under control as a way to limit inflation and control the growth of government.

No more. In the debates on the current tax legislation, the deficit seems to be an afterthought. The House plan would add $1.3 trillion to the national debt during a 10-year period even after accounting for new economic growth from the legislation, according to the Tax Policy Center. The Senate bill is still being worked out and there is no official government forecast on how much it would add to the debt, but it is expected to be a number comparable to the House version.

As the legislative battle intensifies, the Democrats and the Republicans will be trying to shape public perceptions of the legislation through the 2018 mid-term elections and into the 2020 presidential campaign. The GOP is in a particular bind because if Republicans in the majority can't pass a bill, their base will be furious. Many GOP legislators would likely face a revolt from fiscal conservatives at the grass roots, and the party could lose control of the House of Representatives, Galston says. If they do pass a bill, the Republicans will own the tax system and the whole economy. Then, if something goes wrong, such as a spike in inflation, a rise in unemployment or a sharp decline in the stock market, they will be blamed by the voters.

The signs already are not promising for the GOP. The latest Harvard-Harris Poll finds that 54 percent of voters oppose Republican tax reform ideas, and 54 percent also say the GOP plan as passed by the House is more likely to hurt them financially rather than help them.

Republican leaders in Congress appear willing to gamble on passing a bill, even a deeply flawed one. They fear that if they don't get a victory on this issue, after failing to accomplish much under Trump so far, they won't stand for anything except hapless incompetence.

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Kenneth T. Walsh
21 January, 2018