Democracy Dies in Darkness

Wonkblog | Perspective

Trump's tax plan gives Wall Street everything it wants — and that's bad news for them

By Matt O'Brien

October 6, 2017 at 11:06 AM

(Michael Nagle/Bloomberg)

President Trump is trying to give Wall Street what it's always wanted: tax cuts. But doing that might take away what it's always had: the Republican Party.

That, you see, is a pretty good description of Trump's tax plan. It would bestow almost all of its benefits on the Republican donors at the very top of the income ladder, and it would pay for some of this largesse by actually raising taxes on the Republican voters a couple of rungs below that. Indeed, by 2027, the nonpartisan Tax Policy Center estimates that the top 1 percent would be receiving 79.7 percent of all the Trump tax cuts, while the 80th to 95th percentile of households would be getting negative 5 percent. Marxists might call this “heightening the contradictions” — making things worse for people so they'll join the revolution. House Speaker Paul D. Ryan (R-Wis.) describes it as a plan whose “purpose” is to “help the middle class.” You say tomayto, I say tomahto.

Of course, they're not going to call the whole thing off. Instead, Trump is going to try to pass a tax plan that seems as though it was designed to push Wall Street's only allies out of the Republican tent altogether, leaving behind a party that is much more nationalist than conservative.

Now, the Republican Party is really made up of three different wings. The first one, as we've mentioned, is Wall Street. It funds the campaigns, and it tends to get what they want after them. There's a reason, after all, that Republicans have devoted themselves to trying to cut Medicaid to pay for tax cuts for the rich when that enjoys about zero support outside of Aspen, Palm Beach and the Hamptons — and it's not just that conservative intellectuals really like Milton Friedman a lot.

The second are the upper-middle-class professionals who feel as though they're doing much worse than they are. Between their mortgage payments, private school tuition, and 401(k) contributions, they actually don't have that much left over every month. That's the funny thing about money: You don't have as much of it after you spend it. A tax cut, then, sounds pretty good to them, even if it is tilted toward the super-rich.

And the third are the white working class. They never get much besides promises. Things such as building the wall, or banning Muslims or reversing Roe v. Wade. In other words, a combination of racial and religious backlash to get them to the polls.

This is the way the Republican Party worked for the longest time. Wall Street set the agenda, the upper-middle-class went along, and together they managed to get the base to fall in line. “Let them listen to Limbaugh” became the new “let them eat cake.”

Until, that is, Trump came along. Then the balance of power within the GOP really seemed to shift. It's not just that Republican elites weren't able to get people to stop supporting Trump in the primaries. It's that they didn't even know who was supporting Trump in the first place. That makes it kind of hard to sway his base. Not that it would have mattered anyway. Republican voters weren't looking for someone to lead them in another round of the Reaganite catechism. Indeed, they didn't care when no less an organ of the conservative movement than the National Review denounced Trump as a “philosophically unmoored political opportunist.” All they cared about was that he made the right people angry. Well, that and the fact that he was willing to turn what used to be racial dog whistles into something that was almost audible to even a deaf person.

It'd be wrong to say that this was simply a revolt of the GOP's lower class against its upper crust, because plenty of pretty well-off people supported Trump, too. But it wouldn't be to point out that there was a class divide, just based more on education than income. Trump voters were a good deal less likely to have graduated from college than other Republicans. In any case, though, this party infighting didn't last longer than the primaries. Most country club Republicans made their peace with Trump. He wasn't Hillary Clinton, he had an “R” next to his name, and he would probably cut their taxes.

But what if he didn't? What if Trump actually raised their taxes, as the Tax Policy Center estimates his plan would for 60 percent of the households making between $150,000 and $300,000?

Source: Tax Policy Center

Well, there wouldn't be much keeping them in the Republican Party at that point. That's because the one group that was already having second thoughts about "The Apprentice: White House Edition" was these college-educated professionals. Trump's alleged sexual assaults, his degrading comments about women, his immigrant-bashing and his general anti-intellectualism have all been enough to turn what had been solidly conservative districts into competitive ones all across suburbia. They might not even be that close, though, if these upper-middle-class voters find out that Republicans actually want to increase their taxes to help pay for trillions of dollars worth of tax cuts for their former college classmates who went into investment banking.

This is how the party of the Wall Street Journal becomes the party of Breitbart. Republican donors have already been losing the upper hand to the Republican base — Marco Rubio, as you may have noticed, is still a senator, and not the president — and that fight would only get harder if there were an exodus of college-educated voters. The people with the money would try to get the GOP to keep its libertarian faith in free trade, low taxes and high immigration. But the people with the votes would push it to threaten China with tariffs, tax whomever it has to so that Social Security and Medicare don't need to be cut, crack down on sanctuary cities, curtail even legal immigration and keep Confederate monuments.

Call them the Pyrrhic tax cuts.


Matt O'Brien is a reporter for Wonkblog covering economic affairs. He was previously a senior associate editor at The Atlantic.

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