What’s the one big legislative project that President Trump actually managed to see through to completion during the first two years of his presidency? A major tax cut. Is that tax cut helping Republicans in the midterms? No, it is not, which is why they seem delighted to divert attention to the caravan of migrants making its way from Central America toward the U.S. border. And yet, here is Trump promising another tax cut on top of the first.
“This is not for business. This is for middle. That’s on top of the tax decrease that we’ve already given,” he told reporters Monday, promising that the GOP would release the details in a few weeks. Even Republicans sounded a little astonished, before hastening to say that, yup, they couldn’t wait to slap another layer of tax cuts over the last ones.
But it’s multilevel madness. There is no groundswell of public interest in even deeper cuts; a mere 1 percent of Americans consider taxes as the “nation’s most important problem,” according to Gallup. And even if they were interested, Republicans can’t meaningfully cut middle-class taxes without also taking an ax to spending for already-rickety Social Security and Medicare.
That’s because the tax cuts that Republicans are nostalgically aping occurred in a very different political economy. When Ronald Reagan took office, inflation was in the double digits, and tax brackets weren’t yet indexed for inflation, so unless Congress made one of its periodic bracket adjustments, peoples’ taxes kept creeping up even though the purchasing power of their salary might be falling. This made tax rates a highly salient issue for ordinary Americans.
By the time George W. Bush rolled around with his tax-cut plan, that was no longer so true. Tax reforms under Reagan had lowered rates, and inflation adjustments to the brackets meant that those rates stayed roughly where Congress had put them. More of the country’s tax burden was also shifted to payroll taxes, rather than income taxes, to fund Social Security.
In 1980, the bottom 50 percent of taxpayers paid an average of 6.1 percent of their earnings in income taxes; by 2000, it was 4.6 percent. And by 2014 – thanks in part to the Bush tax cuts – that figure was only 3.5 percent, a decrease of nearly half. Why expect those voters to thrill to the idea of cutting taxes they barely pay?
That’s not to say that those folks don’t pay any taxes; they pay sales taxes and payroll taxes and, if they’re homeowners, property taxes. But Republicans in Congress aren’t cutting those taxes, most of which are imposed at the state level, beyond the reach of Congress or dedicated to old-age entitlements that neither party dares touch.
You’ve got a problem when the only big policy idea your coalition can agree on is a retread of the same policy idea they’ve been endorsing for 40 years. But it’s a catastrophic political mistake when that consensus platform offers basically nothing for half of the population. If the party just keeps pounding the same unappealing platform plank, rather than actually doing the hard work of thinking through what’s next, it will lose share to Democrats who actually speak to what voters are interested in.
And of course, that’s not the only thing catastrophic about the Republican fixation on taxes. There’s also the feckless disregard for America’s fiscal future.
George W. Bush was working with the gigantic surplus generated by the dot-com bubble; despite the tax cuts, he was on track to finish his term with a modest deficit until the financial crisis intervened. Ronald Reagan didn’t have a surplus, but he had an at least vaguely plausible theory about how tax cuts might grow the economy enough to cover the lost revenue.
This time around, Republicans had neither. Thanks to the Tax Cut and Jobs Act of 2017, the budget deficit is projected to hit $804 billion by the end of the year. And Republicans cannot claim they didn’t know this would happen; the ballooning deficit was utterly predictable, and widely predicted.
By 2028, if nothing is done, the deficit will hit $1.5 trillion, more than 5 percent of gross domestic product — not a temporary dip during a recession but a year-in, year-out, structural gap between what we spend and what we take in. The tax cuts last year marked one of the most fiscally irresponsible moments in the history of the federal government. And apparently the only thing the president can think to do about it is to grab a shovel and start digging us deeper into the hole.
That would be depressing enough if he were trading long-term fiscal sanity for short-term political gain. But it’s somehow worse that there’s no political benefit to be had. If even naked political self-interest can’t protect us from rotten policy, it’s hard to see what will.