At the heart of the partisan divide in Congress over Republicans' tax bill is this question: Will cutting taxes for corporations and the wealthy benefit the rest of us?
It's a tricky question, because economists and politicians are in disagreement. There is an economic theory that says yes, when businesses get more money, they invest it in the economy and their workers. But other economists point out that tax cuts for the top in the past decade haven't lifted wages.
The Senate's known for being a polite place, so when a Republican senator and Democratic senator started yelling at each other over this very thing Thursday night, we took note. And what Sens. Sherrod Brown (D-Ohio) and Orrin G. Hatch (R-Utah) — chair of the Senate Finance Committee and one of the key authors of the Senate's tax bill — were yelling about got right to the heart of this very question: Will this bill help the rich or the poor, or both?
To better understand both sides, let's break down some of their shouting match with the facts.
BROWN: “It would be nice just tonight before we go home to just acknowledge, well, this tax cut really is not for the middle class — it's for the rich. And that whole thing about higher wages, well, it's a good selling point, but we know companies don't just give away higher wages.”
Translation: In one paragraph, here's Democrats' talking point about Republicans' tax bill. From a pure numbers perspective, Brown has a point. The bill gives the majority of permanent tax breaks to corporations and the wealthy, while households get a mishmosh of tax breaks that expire in a couple of years and popular tax deductions are boosted or cut.
A nonpartisan tax committee found that the average family in every income tax bracket would see its tax bill go down under the House bill. But that same committee also found Americans earning $30,000 a year would pay higher taxes in 2021 than they do now in the Senate bill.
So, corporations will clearly benefit. For the middle and lower classes, it's less clear. Therefore, Brown argues, Republicans are helping out the rich and not the middle class.
Here's Hatch's response:
HATCH: “I come from the poor people, and I've been here working my whole stinking career for people who don't have a chance. And I really resent anybody saying that I'm just doing this for the rich. Give me a break. I think you guys overplay that all the time, and it gets old.”
He added later: “I come from the lower middle class originally. We didn't have anything, so don't spew that stuff on me.”
Translation: As Hatch demonstrates, Republicans are particularly prickly about the argument that they are cutting taxes for their rich buddies and no one else.
That's probably because they know public opinion isn't on their side. A recent Quinnipiac University poll found that 59 percent of Americans think the GOP's tax plan would favor the rich at the expense of the middle class.
Republicans can't afford this bill becoming unpopular. Their attempts to repeal Obamacare got derailed by how poorly it polled. After that failure, some lawmakers are openly saying that if they don't pass a tax bill, their donors (who would probably benefit from the bill) will stop giving them money.
And GOP strategists trying to help Republicans keep their congressional majority say they need Republicans to pass a middle-class tax cut so they have something to sell to voters.
Back to policy. Hatch didn't directly refute Brown's claims that this tax bill benefits the wealthy and corporations more than individuals. That's because it does. But, Republicans argue, cutting the corporate tax rate is like knocking out two birds with one stone — it helps businesses and it will trickle down to workers.
Plus, it's not as if regular Americans see their taxes go up while their employers' tax rate goes down, they point out: The nonpartisan analysis of the House bill found that while the average family in every income level would see its taxes cut, an estimated 10 million Americans would pay more, and millions more after that would see a spike when the individual tax cuts expire in a decade. (Remember: Republicans are proposing permanently lowering the corporate tax rate.) If you've read this far (thank you), you've probably realized that Republicans' position on taxes is a lot more wordy than: Corporations get a permanent tax cut and individuals don't.
Republicans' theory isn't guaranteed by economists, nor proved by recent tax cuts. The economic theory is difficult to explain. They know public opinion isn't in their favor, and they really need a legislative win, ASAP.
No wonder Hatch got so upset when a Democrat started messaging their tax bill as a break for the rich. As for the question at the center of this — whether trickle-down economics actually work — well, if this bill becomes law, perhaps we'll find out. The bill they were debating passed the committee.