Passing a tax cut should be easy with a Republican Congress.
After all, lower taxes are one of the pillars of the GOP faith, one of the few core principles holding the fractious party together. And the tax cut President Trump just unveiled, in his words, is “giant, beautiful, massive — the biggest ever in our country.” What’s not to like?
Plenty, it turns out. Trump’s tax proposal is already running into trouble — largely because he’s making the same mistakes as in his long, failed effort to repeal President Obama’s health-care law.
Once again, our promoter-president has oversold his product. On health care, Trump promised better health insurance at a far lower cost; when he couldn’t deliver, public support for GOP bills evaporated. Now Trump is selling a tax plan he said would boost the middle class, not the wealthy — and that’s turning out to be mostly snake oil too.
“My plan is for the working people,” the president said. “There’s very little benefit for people of wealth.” Including, emphatically, himself: “I don’t benefit. I don’t benefit.”
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Except he does. Trump and his family would benefit in at least four ways from his plan. The top tax rate on any regular income they earned would drop from 39.6 percent to 35 percent. The top rate on the profits of the Trump Organization, their family firm, would drop to an even lower 25 percent. They no longer would have to worry about the Alternative Minimum Tax, which cost Trump $31 million in 2005. And the president’s heirs no longer would face the estate tax, which could have cost them as much as $1.1 billion, according to the New York Times.
Other billionaires would benefit from those provisions too, and other breaks as well. So much for the wealthy getting “very little.”
For middle-class taxpayers, the impact has been harder to figure out because the details haven’t been settled yet. For most, it appears, there would be a tax cut somewhere between modest and negligible.
Not everybody would win. Tax experts said upper middle-class families with lots of itemized deductions could easily see their taxes increase.
Changes in the tax law almost inevitably create losers as well as winners, of course. But Trump and his aides have spent months pretending the inevitable won’t happen.
And just as in the fight over health care, the potential losers instantly formed lobbying groups to argue that they are being unfairly targeted.
It didn’t take long to find the most obvious losers: taxpayers in high-tax states like California, New York, New Jersey and Illinois, who would lose the deduction for state and local taxes. All those states went for Hillary Clinton in the 2016 election, making them easy targets for the Trump administration. But it turns out high-tax states have Republican members in Congress too — many of them from affluent districts where people pay, and deduct, income and property tax bills.
“I’m going to fight this out,” promised Rep. Tom MacArthur, a New Jersey Republican. “It’s not fair to give the entire country a tax break on the backs of citizens of these six or seven states.”
Others including Reps. Peter King of New York and Peter Roskam of Illinois promised to push back too. (No public objections so far from California Republicans, several of whom face tough races but want fundraising help from party leaders.)
On Friday, Gary Cohn, the White House’s chief economic adviser, said the administration would consider negotiating. State and local taxes are “not a red line,” he told Bloomberg television.
But if the administration retreats, that could open a new problem. Eliminating the deduction for state and local taxes was intended to pay for the proposal’s big tax cuts, so they didn’t simply add to the federal deficit. Until now, the self-proclaimed deficit hawks in the House Freedom Caucus have supported the tax plan, even though it could add as much as $2 trillion to the deficit over the next 10 years. It’s not clear whether they will accept even more red ink.
Just as in the case of health care, Republican leaders decided to try to pass this legislation through the process known as budget reconciliation — meaning they would need only 50 votes in the Senate instead of the usual 60. Instead of trying to negotiate a bipartisan bill through House and Senate committees, they chose, once again, to move forward with only GOP votes.
As a result, any determined opposition within their own party — from blue staters or the Freedom Caucus in the House, or any three Republicans in the Senate — can block the bill from moving forward. Furious, dramatic negotiations lie ahead.
Some kind of tax cut still appears likely to pass, for the simple reason that many Republicans believe their political survival depends on it.
“It’s the difference between succeeding as a party and failing,” Sen. Lindsey Graham of South Carolina said last week. “It’s the difference between having a majority in 2018 or losing it. It’s the difference between one term and two.”
But wait. Didn’t he say that during the health care fight, too?