“When you’re explaining, you’re losing,” conventional political wisdom has told us. In an era when confirmation bias runs rampant, explanation is particularly challenging. If you must explain complicated policy choices, some simple rules may enhance your chances of breaking through the political noise — be consistent, be early, be believable, be candid and be able to withstand scrutiny. The Trump administration, however, has broken virtually every rule of political explanation, which now leaves it struggling to justify its do-or-die tax plan.

The Trump administration is pushing back against criticism from Democrats that its tax-reform plan will be a boon for the rich, casting the GOP bid to slash corporate taxes as a win for workers.
The White House has reason to worry that arguments made by Democrats and other critics are resonating. A CBS News poll released Sunday found 58 percent believe Republicans’ tax proposals would favor the wealthy, with just 18 percent saying it would favor the middle class.

As part of its defense, the administration’s chairman of the White House Council of Economic Advisers, Kevin Hassett, put out a report claiming that Trump’s proposed tax cut would boost wages on average by $4,000 per worker. That claim was widely panned by opponents of the tax plan, who cited a raft of economic literature saying that corporate taxes fall mostly on capital, not labor.

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After reading through lists and summaries of studies on the topic, we find Bruce Bartlett’s conclusion in 2013 the most defensible: “Most economists now agree the burden of the corporate tax falls on labor to some extent, but there is disagreement over the degree.” In short, who knows?

Resting your claim to middle-tax class relief on what Jared Bernstein calls “a literature review that picks only the ripest of cherries, ignoring the large body of literature that goes hard in the other direction” is likely to convince no one who isn’t already enamored of supply-side economics.

This defense comes weeks after the Trump administration has been incredulously insisting that none of the benefits of its plan go to the rich and demonizing critics for trying to fill in the blanks of a half-baked tax plan. Hassett’s belated defense, fairly or not, suffers because of the administration’s lack of credibility on not only taxes but also everything else.

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By rolling out a half-completed plan that lowers the top marginal rate for the richest taxpayers, calls for a 25 percent rate for “pass-throughs” and does away with the estate tax, the administration has set itself up to be pummeled. It combined obvious, specific breaks for the rich with fuzzy promises for the middle class. That clarified the administration’s priorities.

The administration and Congress surely can devise a tax plan that matches its hype. The Tax Foundation warns:

In particular, the Framework does not specify how much the child tax credit would be increased. This is a very important detail, because the child tax credit is one of the central provisions that determines how much many middle-income households owe in taxes. In addition, under the Republican Framework, households with children would lose the personal exemption for each child, and lawmakers seem to be counting on an increase in the child tax credit to help make up for the loss of the personal exemption.

Make that tax credit big enough and the middle class will reap larger benefits — but it will vastly expand the debt unless some tax breaks for the rich are reduced or eliminated.

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Likewise, Republicans could raise the 15 percent capital gains tax rate (applicable to those below the top bracket). The Tax Policy Center explains how to generate more revenue and maintain or increase the code’s progressivity:

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The solution may not be to raise the top long-term capital gains rate applicable to the highest-income taxpayers, which now can be as high as 25 percent. A better fix may be to boost the lower 15 percent rate (applying to taxpayers with incomes below the top tax bracket) to 20 percent. While it may seem counterintuitive, that step could generate much more revenue than raising the top rate, while still imposing most of the tax increase on high-income households. …
Congress can raise more revenue and target most of the tax increase to high-income taxpayers by reducing the incentive to defer gains. This can be done by raising the 15 percent rate on long-term capital gains to 20 percent. TPC estimates that this change would generate $50 billion over a ten-year period, more than twice as much as raising to 20 percent rate by a similar 5 percentage points. Why? Because most gains are realized by taxpayers in the 39.6 percent bracket who already face the 20 percent tax rate on their long-term capital gains. This proposal raises their average tax rate on capital gains but leaves their marginal tax rate unchanged. It’s the marginal tax rate that determines whether taxpayers sell assets with accumulated gains or hold them instead.

In other words, rather than throwing out lame excuses for a plan that’s excessively weighted to the rich, Republicans need to change the plan. (If, however, they simply want a big, fat tax cut for Trump and his rich friends, this will be problematic.) Enlarging the child tax credit and increasing the 15 percent capital gains tax rate to 20 percent are two ways to accomplish this. Dumping the 25 percent pass-through rate, keeping the top marginal tax rate where it is and keeping the estate tax (which now falls only on estates in excess of $5.49 million per person) would be other ways. Whatever changes they make to bring their plan in line with their rhetoric, Republicans should then abide by the rules of political explanation — be consistent, be early, be believable, be candid and be able to withstand scrutiny. Then the plan might have a chance.

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