Saturday 17 November 2018

Why Republicans cherish a tax bill that voters hate

'Trump wanted a victory, whatever it took; he fumes at being justly dubbed one of the least successful first-year presidents'
'Trump wanted a victory, whatever it took; he fumes at being justly dubbed one of the least successful first-year presidents'

Albert Hunt

Congressional Republicans are about to pass - and US President Donald Trump is about to sign - a tax bill that violates Trump's campaign promises, does little for the middle class, ignores decades of party orthodoxy on tax cuts and is unpopular with voters.

Still, Republicans are celebrating one of their few achievements. They may be right to do so.

In the unlikely event they can't resolve differences between House and Senate tax legislation, Republicans would head to mid-term elections after a year in control of all the levers of power with just one achievement: the confirmation of Supreme Court Justice Neil Gorsuch. That would deprive Republican incumbents in 2018 of any positive argument for re-election.

"We can't afford to fail," said Senator Lindsey Graham, the South Carolina Republican, articulating party leaders' conviction that passing a bill matters more than what's in it.

Trump wanted a victory, whatever it took; he fumes at being justly dubbed one of the least successful first-year presidents. Key provisions of the tax bills would also enrich him personally, along with his family - it's impossible to say by how much because he has refused to release his tax returns, but estimates have put the benefit to him at well over $20m (€16.8m). If you believe his claim that the bill will cost him "a fortune" then you also probably believe he won the popular vote last year and drew the biggest inaugural crowd ever.

The bills violate some of Trump's main campaign promises. He vowed the rich would not get a tax cut, but they'll get a big one. He said tax cuts wouldn't increase the deficit; congressional analysts have determined that it would add $1trn to the national debt even after accounting for increased growth. He promised not to touch Medicare, but the tax bill will force reductions.

The tax legislation won't deliver much in the way of benefits to the white working-class voters whose ballots in key Midwestern states sent Trump to the White House. But it won't cost them significantly either. Hits to university scholarships, public transport and other subtler effects are less traceable to these latest tax cuts, or at least that's the calculation.

Both Trump and congressional Republicans want to believe their rhetoric about tax cuts generating an economic boom, though history suggests otherwise. But most economic forecasts already anticipated growth next year, which would give Republicans seeking re-election the chance to claim a connection.

There are some benefits for average Americans, including an increase in the child tax credit.

But there is potential political damage in one critical area: suburban communities with upper-middle-income professionals who politically often are evenly divided. Taking away the deduction for state and local income taxes could be a killer for more than a dozen Republican House incumbents in high-tax states like New York, New Jersey, Pennsylvania, Illinois and California.

Many of these voters pay the top marginal tax rate of 39.6pc, which won't change much in the final product. Instead, the bulk of the cuts go to corporations and other businesses. The trickle-down economics tax cuts championed by Ronald Reagan in 1981 enjoyed strong public support at a time when individual rates were much higher. The 1986 bipartisan tax overhaul, a real systemic reform that lowered taxes for most individuals and raised them for many businesses, enjoyed plurality support. By contrast, most polls show the public opposed to this year's measure, which is seen as a sop to the rich.

Ask Republicans about that and their answer comes down to this: how many politicians have lost an election because they voted for a tax cut?

Irish Independent

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