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Opinion After huge tax breaks for the rich, there’s not enough for the sick and poor

Sen. Orrin Hatch. (Melina Mara/The Washington Post)
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At times, Republicans sound as though they are writing Democrats’ campaign ads for them. Sen. Orrin Hatch (R-Utah) made his in-kind contribution last week. Newsweek reported: “During the tax debate on Thursday evening, [Hatch] commented on the Children’s Health Insurance Program (CHIP), saying that it would be funded but that the lack of funds available was problematic for CHIP. … ‘There’s no question about it in my mind. It’s got to be done the right way. But we, the reason CHIP’s having trouble is because we don’t have money anymore,’ ” Hatch said as the Senate was considering a mammoth tax bill that will hemorrhage $1.5 trillion in revenue.

He went on, “I have a rough time wanting to spend billions and billions and trillions of dollars to help people who won’t help themselves — won’t lift a finger — and expect the federal government to do everything.” He continued: “Unfortunately the liberal philosophy has created millions of people that way, who believe everything they ever are or hope to be depends upon the federal government rather than the opportunities that this great country grants them. And I’ve got to say, I think it’s pretty hard to argue against these comments.”

It’s not clear at all that he was referring to the 9 million children who receive CHIP benefits when he was going on about freeloaders, but he should specify exactly whom he was referring to. He might recall that welfare reform included a requirement to work or seek work, so is he talking about Medicaid? Social Security? (We’re getting perilously close to Mitt Romney’s “47 percent” gaffe.)

Hatch’s attitude perfectly encapsulated how President Trump’s populism coexists next to, and is subsumed, by a cringe-worthy devotion to rich donors and big corporations. We can bleed the treasury dry to enrich the wealthy and big corporations, but when it comes to the safety net’s beneficiaries, we need to get tough!

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Pro-market capitalism — and even tax reform — can nicely coincide with a strong safety net and determination to get as many Americans as possible onto the ladder to success. What’s not consistent is the distortion of pro-market capitalism that intentionally expands income inequality, balloons the debt, creates new tax dodges such as the 25 percent rate for “pass-throughs” and repeals the estate tax (the sliver left) that applies only to the super-rich. For starters, there is no economic argument right now for a tax cut. However, if they wanted a tax cut, Republicans didn’t need to pass this moral and economic monstrosity.

In fact, the 1986 tax reform bill was precisely the sort of pro-market tax reform that removed distortions caused by the tax code and was able to lower rates. Stuart Eizenstat recalls:

The essence of the Reagan plan, embraced by the Democratic leadership that controlled the Congress, was to create a fairer, simpler tax system, with lower rates and fewer tax breaks for the wealthy and corporations, that did not inflate the budget deficit. By appealing to Democrats with the liberal idea of closing tax loopholes, shelters and deductions for the wealthy, with the conservative Republican philosophy of lowering tax rates, he forged a bipartisan coalition.
The act lowered personal and corporate tax rates, while remaining revenue neutral by broadening the tax base through eliminating tens of billions of dollars in tax loopholes for the wealthy and corporations. It also [changed] the capital gains rate from 20 percent to 28 percent, agreeing with Democrats that capital gains generally benefiting the wealthy should be taxed at the same rate as ordinary income from workers — the heart of Reagan’s and now Trump’s blue-collar support. Reagan said in championing the bill that he wanted to “close the unproductive loopholes that allow some of the truly wealthy to avoid paying their fair share.”
It exempted millions of low-income families from a federal income tax by expanding the standard deduction, personal exemption and earned income tax credit; it drastically reduced the number of tax brackets, with the top rate for individuals cut from 50 percent to 28 percent; and it slashed corporate tax rates from 48 percent to 34 percent, paid for by eliminating or reducing corporate tax breaks.

That was a coherent, responsible plan. That’s not what we have now. Moreover, after promising not to touch entitlements, Republicans will suddenly “discover” their budget-busting tax bill requires just that. And the less well-off will pay the price.

Republicans make a specious argument that anyone against their tax bill wants to raise taxes and that anyone who doesn’t want to cut programs to pay for it is indulging freeloaders. Balderdash. One can reform the tax code without flooding the treasury with red ink. One can set up a safety net that encourages independence and respects the dignity of work. Unfortunately, that brand of honest conservativism has been discredited by the charlatans selling the current set of policies.