Yet Bush may have lived just long enough to witness the moment at which tax cuts have finally reached the point of diminishing political returns for Republicans.
Bush’s reelection campaign crashed in 1992 after he decided to increase federal levies, but the careers of several dozen GOP members of Congress just ended in the November midterm elections, after they voted to slash taxes.
The voters’ verdict may reflect a sea change in public priorities with implications for the nation’s long-term fiscal predicament, which was badly exacerbated by the 10-year, $1.5 trillion revenue reduction approved by a Republican-controlled Congress and signed by President Trump in December 2017.
Supply-side economics — roughly speaking, the idea that cuts to tax rates pay for themselves in increased long-term growth — became Republican orthodoxy in the late 1970s and early 1980s, partly because there was a superficial plausibility to it and partly because it suited the Sun Belt business interests that had attached themselves to Ronald Reagan’s 1980 presidential campaign.
Despite his move to Texas and the oil business, Bush remained at heart a Northeastern Republican, a Wall Streeter’s son who supported favorable tax treatment of capital gains but could never quite understand how cutting taxes would lead to more revenue. “Voodoo economics,” he called it, before joining the Reagan administration as vice president and getting with the program.
To reassure skeptical Reaganites, he pledged in accepting the party’s 1988 presidential nomination that he would tell Democrats “Read my lips” if they dared ask him for higher taxes to offset the deficits Reagan’s tax cuts and defense spending had run up.
In office, though, he could not suppress his instincts, reaching a budget-balancing deal with a Democratic Congress that involved tax increases. The backlash from the right taught Bush and his family an enduring lesson, which his son George W. Bush applied as president after 2001, cutting taxes massively even though the country was waging expensive wars in Afghanistan and Iraq. Unlike his dad, he got reelected.
Though most benefits of income-tax rate cuts in a progressive system naturally go to the rich, many in the middle class either supported or acquiesced in them because they felt their taxes were too high as well.
Between 1962 and the beginning of the 21st century, the share of the public describing their federal income taxes as “too high” hovered consistently in the range of 60 percent in Gallup polls. Many Democrats described their federal tax burden as excessive, too.
But after the George W. Bush tax cuts, which were mostly retained for middle- and upper-middle-income taxpayers under President Barack Obama, public opinion shifted. For the past 15 years, the “too high” percentage in Gallup’s polling has never exceeded 52 in any year. And in April 2018, only 45 percent embraced that complaint; they were outnumbered by the 48 percent who conceded that their taxes are “about right.”
In short, there’s no wide hunger for lower federal taxes. Small wonder that majorities of the public consistently disapproved of the Trump tax bill, and that it made little or no favorable impact for Republicans at the ballot box in November.
To some extent, the GOP is a victim of its own past tax-cutting success: There just isn’t that much more “relief” to grant.
The federal government took in 17 percent of gross domestic product in 2017, according to the St. Louis Federal Reserve, 2.7 percentage points less than it did in 2000. Some 44 percent of U.S. households do not owe any federal income tax, according to the Tax Policy Center.
The main source of dissatisfaction with the tax system now appears to be the public’s view that it favors the rich; only 24 percent say upper-income people are paying their “fair share,” according to the April 2017 Gallup survey.
At present, the GOP may have no way out of this predicament. Trump’s last-minute promise of more tax cuts just before the election achieved nothing, and there is no chance to fulfill the Republicans’ other promise — to make the 2017 law’s individual cuts, set to expire in 2025, permanent.
In 1990, it was indeed political suicide for George H.W. Bush to support a tax increase. The situation for Trump and his fellow Republicans now may be even worse: Promising to cut taxes for everyone no longer helps them politically, while promising to raise taxes, on the rich, may help the Democrats in 2020.