The Washington PostDemocracy Dies in Darkness

Fixing the tax bill: How Democrats should use some rare leverage

(J. Scott Applewhite/AP)

Republicans need Senate Democrats to help them fix their tax bill, which, as documented in this New York Times piece, was jammed through with a bunch of drafting mistakes that are now posing real problems for farmers, small businesses and even multinational corporations.

For example, based on a mistake that significantly hurts certain grain sellers, one executive from Oklahoma, an avowed Republican, said he’d be “receptive to selling our business” if the “grain glitch” isn’t fixed. In words that cannot be resonating well with Republican leadership, he said he longed to go back to the old code. Another grain operator claimed that unless the glitch is fixed, it would “drive investments in rural America away. We can’t compete.”

These rural farmers are not alone. Retailers, restaurateurs and U.S. companies with foreign operations are all calling for quick fixes to the sweeping bill.

Here’s the crucial point: Republicans can’t fix most of these drafting mistakes without votes from Senate Democrats. That gives Democrats the leverage they lacked in the original tax debate, which was passed using a procedural method that required only a majority in the Senate, as opposed to 60 votes.

Democrats should use that leverage to insist on, if not the moon, then at least some major planets. As David Dayen stresses here, Republicans did not merely refuse to help Democrats fix errors in the Affordable Care Act. They pressed their advantage all the way to the Supreme Court, resulting in millions of low-income people, to this day, not getting Medicaid coverage as the original law intended.

So, as a friendly service to Senate Ds, and with the caveat that others will have other ideas in this space, here is my list of what I’d insist on in return for fixing their tax mess.

DACA: The so-called dreamers must get permanent status. And this one should barely count because moderate Republicans, including even Trump himself on alternate weekdays, support this reform.

Significant EITC expansion: The Republicans managed to deficit-spend what may amount to $1.8 trillion (over 10 years, including debt service) on their tax cuts without adding one dollar to the Earned Income Tax Credit, a pro-work wage subsidy to low-income workers. There’s been bipartisan interest to expand the far-too-small EITC that goes to childless adults, but I’d urge Democrats to use their leverage on behalf of much more ambitious expansion, like the one discussed here that would push back on the post-1970s inequality divide while raising the incomes of almost 50 million low-income households.

Fix the Child Tax Credit: The final tax bill expanded the Child Tax Credit but managed to exclude the lowest-income working parents by not making the expansion fully refundable, such that those with low or no tax liability do not fully benefit from the increase. It also removed eligibility for the credit from about 1 million immigrant children whose working parents pay taxes. Any fixes for farmers and multinational corporations must also include this fix for low-income, working parents.

A higher federal minimum wage: I recently pointed out on this page that the federal minimum wage has been stuck at a preposterously low $7.25 since 2010. True, more than half the states have raised their own wage floors well-above the federal level, so a federal increase would merely allow some laggard states to catch up to the rest of the country. Like the tax credits above, this idea, in contrast to the inequality-inducing tax bill, helps to close wage gaps, and with the economy closing in on full employment, now is a good time for an increase. (The level should depend on the phase-in. Especially in Southern states with structurally low wages, a large increase, like the $15 an hour many advocates support, should have a long, slow phase-in.)

A subsidized jobs program: Support is building for a program to help reach disadvantaged workers in places left behind even in year nine of the current expansion. As I discuss in this recent paper for the Brookings Hamilton Project, Congress should allocate a mandatory Full Employment Fund to support a jobs programs that could range from less interventionist employer subsidies to more ambitious direct job-creation initiatives.

I’ll leave it to others to get into the politics of this play, but one objection to the strategy I propose is that by extracting this progressive pound of flesh, hard-right House Republicans may decide they’re willing to let the tax system stay broken rather than raise the minimum wage or help immigrant children. In that case, House leadership could rely on a coalition of moderate Republicans and Democrats to pass the fixes. Given their vested interests in fixing the glitches, this shouldn’t be a big reach for Reps. Ryan, Brady, et al.

The key to the whole strategy, of course, is stiff Democratic spines across the caucus. Remember the ACA, Democrats! Remember the lack of hearings or any allowable input during the tax “debate.” This is their mess, not yours. You therefore have but two good options: Either don’t help them at all, or get the above agenda (or some variation) in return.

And please, in this case, forget “they go low, we go high.” Instead, go with this: In their rush to transfer billions to their funder base, they screwed up; here’s the cost of the fix. Take it, or leave it.