The GOP's baffling decision to raise taxes on millions of Americans
If there's one thing we thought we could count on in this crazy world, it's that Republicans will never, ever, ever support a tax increase. It wasn't always this way — Ronald Reagan, who to hear some people tell it practically walked the Earth without sin, actually raised taxes multiple times — but today there may be no more foundational belief to the GOP than the principle that taxes must come down, everywhere and always. In fact, 46 of the 52 Republicans in the Senate and 210 of the 240 in the House have even signed their names to a pledge in which they promise to oppose any increase in marginal income tax rates or any elimination of deductions unless it's matched by further reductions in tax rates.
We could quibble about whether there's any breathing room in that pledge, and the group that sponsors it, Americans for Tax Reform, is promoting the current Republican tax bill. But here's what's so strange: The GOP is right now rallying around a bill that will raise taxes on tens of millions of Americans.
You might argue that in the abstract it's fine to raise taxes, if you're raising them on the right people. This bill happens to fail on that score, but the point is that you'll never hear Republicans say that. Their unwavering position for years has been that raising taxes on anyone is an abomination, a horror, a crime against capitalism so gruesome that to do so is to snuff out the flame of freedom that gives humanity its purpose and hope.
And yet, the "reform" bills they have crafted are remarkable in how many people they will cause to find their tax bills go up.
Before we endeavor to explain this bizarre turn of events, we should understand the magnitude of the increases. Unlike previous Republican tax cuts that showered most of their benefits on the wealthy but gave most other Americans a little something so they could claim that everyone benefited, this bill is an extremely complex combination of cuts and increases. While marginal rates go down, many long-favored deductions are being eliminated. The standard deduction will be increased, but personal exemptions will disappear, likely hurting many families with children. You might get helped by a reduction in the rates, but you'll no longer be able to deduct your state and local taxes. A long list of other deductions, for things like medical expenses, adoption expenses, and student loan interest, will disappear.
Which means that you might be a winner or you might be a loser, depending on your unique combination of expenses and income. And as preliminary analyses show, there will be people getting a tax cut and people getting a tax increase at all levels of the income spectrum. While it's still true that most of the benefits go to the top (this is a Republican plan, after all) there will even be some rich people losing out.
So how many people get a tax increase? According to an analysis of the House bill by the nonpartisan Tax Policy Center, a remarkable 47 million households will be paying more by 2027 than they would under current law. The Senate bill isn't quite as vicious — but it would still increase taxes on over 19 million households. As The New York Times noted in its analysis, "Between 10 million and 15 million taxpayers earning less than $100,000 a year would pay more than under existing law." If both plans pass their respective chambers, a conference committee will arrive at a compromise, and while we can't be sure how far it will move in the direction of one version or another, it's sure to hit tens of millions of Americans.
That Republicans would propose such a plan is nothing short of stunning. Yet they are convinced that to not pass it would be political suicide. "If we don't" cut taxes, Sen. Lindsey Graham (R-S.C.) said, "we're dead." The theory is that their base is so fed up at their inability to pass legislation that if Republicans can't say they accomplished this, that base will stay home in the 2018 midterm elections and they'll be shellacked. Which might be true, but it doesn't answer the question of why they constructed a bill that raises so many people's taxes.
One partial explanation lies in the Senate budget they recently passed, which will allow them to increase the deficit by only $1.5 trillion over the next 10 years. In order to stay within that limit, they had to offset some of the big tax cuts, particularly the slashing of the corporate rate that is the centerpiece of this bill. And since that cut in the corporate rate has become so important to them, along the way they've grown willing to raise individuals' taxes in order to achieve it.
When they're asked about the tax increases, Republicans inevitably say that cutting corporate rates will create a volcanic eruption of economic growth that everyone will benefit from. This claim is completely bogus (corporations are already experiencing near-record profits and have plenty of cash; what they get back from a tax cut is likely to just be returned to rich shareholders), and it's hard to imagine that they really believe it. But even if they did, it would still mean that some people would benefit and some people would suffer. You might get a job in a new widget factory at a great salary, but you also might stay in your old job — and just have to pay more taxes.
There are plenty of goodies dear to Republican hearts in these bills, like the elimination of the estate tax (giant sigh of relief from Eric Trump) and the Alternative Minimum Tax, marginal rate cuts that those at the top will benefit from, and the opening of a gigantic "pass-through" loophole whose most important beneficiary will be the Trump Organization. But that still doesn't completely explain why they're so eager to raise taxes on tens of millions of people. I wish I had a perfect explanation for why they've written the bill this way, but I don't. It's a mystery.