The Tax “Reform” Circus Comes to Town
by John Lawrence
Having placed pennies on the eyes of the stillborn American Health Care Act, Team Trump is now pivoting towards the more promising legislative goal of tax legislation. Not necessarily tax reform, which would imply restructuring tax obligations to ensure the ultra-affluent pay their fair share, but rather tax shifting to let the wealthy and corporations keep more of their money. When you hear Republicans say “tax reform,” there’s one thing you can be certain is coming (although never mentioned), and that is higher deficits.
Health care was a sideshow, needed in order to achieve a massive tax cut for the richest Americans that would help to finance the tax bill. Rest assured however: the circus that is coming to town is all about cutting taxes for the rich, and the deficit be damned.
The preliminary maneuvering suggests that legislating tax policy might be as rocky a road as the demolition derby that was health care “reform.” The key to any tax bill is the distributional curve: who gets more, and at what cost. As with the Reagan and George W. Bush cuts, the huge middle class would certainly secure some mild reductions in their tax bill, which pushes the cost of any such bill into the stratosphere. But the bulk of the benefits would go to the small elite of millionaires and billionaires who populate the world of Trump, Ryan and the Republican majority (as well as the Cabinet and White House staff).
If Democrats can’t figure out how to turn the tax debate into a messaging and electoral coup, they should hang up the spurs. The key is to keep it simple. The disproportionate amount of tax relief going to the wealthy affords Democrats a priceless opportunity to tarnish any claim that Republicans or Trump have (which is admittedly only a cynical one) to being a leader for the “little guy.” If anyone in the white working class missed the message of TrumpCare (“you lose your health guarantees while rich folks get a big tax cut”), the missive from the tax bill should be even clearer: “we are going to shower money on the richest Americans, run up a massive deficit, as Republicans always do, and then use the deficit to justify massive reductions in domestic programs that benefit low-income, job-deprived , undereducated Americans.”
This syndrome has been going on for over 30 years, since Ronald Reagan figured out it was easier to eviscerate domestic programs he disliked by pleading poverty born of tax policy he had perpetrated. Instead of denouncing popular New Deal and Great Society programs, as Barry Goldwater had learned was electorally perilous, Reagan generally sidestepped condemning them but created a deficit that “compelled” him to reduce domestic spending, a strategy later acknowledged by Budget Director David Stockman. There is a reason the biggest deficits are created during Republican presidencies, after all: the so-called fiscal conservatives cut tax and revenues, decline to pay for these cuts through comparable spending reductions or the reform of entitlements, and then wail about the rising deficits that can only be reduced (not really) by slashing tiny domestic discretionary spending (excluding military spending) that has already grievously suffered due to sequestration.
As the highly respected (though admittedly left-leaning) Center for Budget and Policy Priorities reported in 2013, “Bush tax cuts are likely to continue be a major driver of federal budget deficits 20 years after they were first passed” despite efforts by President Obama and congressional Democrats to rein them in. In addition, the nonpartisan Congressional Research Service concluded that Bush cuts “helped widen income inequality in the 2000s.” Nearly three quarters of the Bush tax cuts in the early 2000’s went to the top 10% of taxpayers (and 30% to the top 1%!), while the lower 60% of taxpayers received just 12% of the benefits. Little wonder that the 2009 deficit for fiscal year 2009, that greeted Barack Obama, was $1.4 trillion, the largest deficit relative to the economy since the end of World War II. Add in Bush’s other unpaid-for spending including the wars in Afghanistan and Iraq, the Part D Medicaid Expansion, and the damage caused by a failure to regulate the housing and financial services markets, and the responsibility shifts decisively from Democrats – who opposed all these decisions – to the conservatives fiscal “hawks.”
It certainly does not help that the tax debate will occur in the aftermath of both the health care implosion and the release of President Trump’s budget, which was so appallingly targeted against lower income Americans that even many conservatives have shied away from embracing it. No feature more illuminated the Dickensian motives behind this malevolent blueprint than the decision to zero out funding for the Meals on Wheels program. OK, I get it; you want to get rid of programs that “waste” taxpayer dollars. But really, starving a program that provides hot, nutritious meals to disabled, homebound elderly people, and are typically operated by charities (often churches): where is the message in such mean-spiritedness? Sure, toss in the assaults on the National Endowments for the Arts and Humanities, the Corporation for Public Broadcasting, the National Institute for Health – all that money that doesn’t add up to squat in a nearly $4 trillion budget. (And you can throw in ending heating aid to freezing Trump voters in the upper Mid-West.)
It remains to be seen if the Congress will have much appetite for such proposals that appear to defy the most elementary principles of politics. Sure, conservatives want to cut spending, but even most of them want to remain in office (check out how many have renounced their self-imposed term limits once they got used to their 18 person staffs and being the belle of the ball in their districts). Trump’s bizarre (sorry, there is no other words for it) strategy is to publicly browbeat the Breitbart crowd, growling “The Freedom Caucus will hurt the entire Republican agenda if they don’t get on the team, & fast. We must fight them, & Dems, in 2018!”
With plans, policies and strategies like these, the federal deficit isn’t the only thing that is going to grow like a beanstalk in the years to come. Trump’s deficit in approval ratings is so profound that it may well be only a matter of time before Republicans on the Hill abandon any pretense of being on the Trump team and do what politicians generally do: worry about their own seat before they worry about yours.