The Risky Politics of Tax Cuts

Will passing tax reform prove a Pyrrhic victory?

By Nathan Pippenger

Tagged Taxes

Last week, I attended a lecture by The New Yorker’s George Packer, who observed that one of the major political developments during his life has been the growing nihilism of the American right. His remarks also included a discussion of various competing narratives of national identity, one of which—the “Libertarian America” narrative—rose to national power in the Reagan era. Today, Packer argued, the adherents of this narrative resemble “a head without a body”: Their policy agenda is designed by and for Republican elites, and it holds far less appeal to most other Americans—including Trump voters, who proved quite willing to support a Republican who departs from familiar tenets of antigovernment ideology, so long as it benefits the right people.

The current push for tax cuts in Congress indeed demonstrates something of Libertarian America’s nihilism (or, perhaps, its single-minded fanaticism); the question is whether tax-cut madness can overcome through sheer force the rather sharp limits that Packer detects in its appeal. Mike Konczal was surely right to note, in his understated summary of the House bill that passed last week, that “it’s tough for ordinary people to understand what is happening.” Just as they did with health care, Republicans are rushing to pass a bill before Democrats, the CBO, organized interest groups, or even many within their own caucus can be certain about what’s in it. And just as with health care, this process more or less breaks our categories for evaluating representative government: Republicans seem interested neither in taking guidance from their constituents (demonstrated by their rush to pass a bill before debate can occur) nor in acting as trustees on their behalf (demonstrated by their shaky understanding of the consequences of various overhaul schemes).

But the similarity to the GOP’s health-care efforts is not merely procedural: The Senate’s version of the tax bill has become a health-care bill. In order to make its corporate tax cuts permanent and still comply with deficit rules, the bill eliminates Obamacare’s individual mandate penalty, which would create chaos in insurance markets, raise premiums, and cause about 13 million Americans to lose their health insurance. Doing this would pay for annual tax cuts of nearly $15,000 for households with incomes over $1 million, and nearly $95,000 for those with incomes over $3.1 million. And as the taxes paid by rich Americans fall by billions, middle-class Americans, in addition to paying more for health insurance, would also pay billions more in taxes.

This is where the politics of tax reform start to raise the question of what Greg Sargent has called the “’pluto-populist gap’—the vast disconnect between how working-class whites perceive President Trump’s instincts and intentions on the one hand, and his full-on embrace of the congressional GOP’s plutocratic agenda on the other.” A poll earlier this month showed that whites without a college education were nearly evenly split on Trump’s plan, although the House bill could trigger Medicare cuts that would hit many of his voters. Every day that passes brings more headlines announcing the looming tax hike faced by most Americans, and this negative press weakens Trump’s claim that he’s delivering a tax cut to voters. Of course, these facts will hardly matter inside the conservative media echo chamber, but they might still break through to some reachable voters. And, following Packer’s “head without a body” comments, this negative publicity can only shrink the plan’s already-meager constituency, which seems to consist mostly of people like this:

In his lecture, Packer identified and surveyed three other narratives of national identity, including one he called the “America First” narrative. These are the people who defied certain elements of the familiar GOP orthodoxy, especially on size-of-government and economic issues, in their embrace of Trump. Although Packer portrayed Libertarian America as a body without a head, perhaps what we really face today is a sort of conservative Frankenstein’s Monster: a head of traditional Republican priorities stitched to a body of cultural resentment and right-wing populism.

Perhaps more than any other item on Trump’s agenda, the push for tax cuts strains the monster at its stitches. It’s too soon to tell whether the Republicans’ tax ambitions will meet the same fate as their health-care ambitions. (Indeed, as this bill shows, it’s too soon to know what the fate of their health-care effort even is.) But this basic dynamic is unlikely to change: Republican elites, including the President, want to slash taxes for rich donors, don’t care if doing so requires raising taxes on Americans who make far less, don’t care very much about the consequences, and don’t want anyone to know what they’re doing or have enough time to react to it. Those of us who have watched Year One of the Trump presidency closely may be inured to this kind of chaos, but many voters who (foolishly) trusted him are waiting for the President to deliver. Not only will successful enactment of the Ryanesque agenda not serve their interests; it may help prove the simple truth that he never planned to. If tax reform passes, GOP leaders will breathe a sigh of relief that they managed to check one item off their agenda before the end of the year. But with luck, it may also be looked back on as the moment when Libertarian America’s fanaticism began to weaken the marriage of convenience that delivered the 2016 election.

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Nathan Pippenger is a contributing editor at Democracy. Follow him on Twitter at @NathanPip.

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