Why Isn’t There More Republican Opposition to the G.O.P. Tax Plan?

Why Isn’t There More Republican Opposition to the G.O.P. Tax Plan?

The Republican Party appears to be staking its future on a tax overhaul that represents the antithesis of the populist movement that helped elect Donald Trump.

On Wednesday night, Reuters held a panel discussion at its Times Square headquarters about the Republican tax plan. It turned out to be one-sided. None of the three economists up on the dais had anything positive to say about the bills being considered on Capitol Hill. Neither did the fourth panel member, Mark Cuban, the Texas entrepreneur who has said he is considering running for President in 2020 as a Republican.

Alan Blinder, the former vice-chairman of the Federal Reserve board, put up some charts showing that there isn’t much of a correlation between economic growth and low tax rates. On the contrary, growth in the U.S. has been strong at times when taxes have been high, such as in the nineteen-fifties, when marginal tax rates reached ninety per cent, and in the nineteen-nineties, when Bill Clinton raised taxes on high earners.

The second economist on the panel, Mark Zandi, the chief economist of Moody’s Analytics, was even more scathing about the Republican plan. According to his economic model, he said, the tax cuts that the G.O.P is proposing would have virtually no impact on G.D.P. growth over the next ten years, but would widen the budget deficit substantially and increase the debt-to-G.D.P. ratio by about six percentage points. Raising the question of why anybody would want to adopt such a plan, he said, “I don’t get it.”

The third economist, Dambisa Moyo, is an author and a public speaker who sits on the boards of three big companies—Chevron, Barclays, and Barrick Gold—all of which stand to benefit from the Republican proposal to cut the corporate tax rate from thirty-five per cent to twenty per cent. But, far from praising the G.O.P. plan, Moyo pointed out that the last time the corporate rate was reduced, in the nineteen-eighties, corporations used their tax savings to increase dividend payouts to shareholders rather than to invest in plant and capital equipment, or to raise wages.

Cuban was the other person on the panel. Was he any more positive on the tax plan? No. He described the effort to cut corporate taxes as a distraction from the real challenge facing businesses: the ongoing digital revolution. “Competition drives what I do in my businesses a whole lot more than tax rates,” Cuban said. “Amazon is going to affect a whole lot more companies and futures, as will Microsoft and Facebook and Google and other big companies, a lot more than a marginal tax rate.” Cuban also pointed out that if the goal of tax policy is to put more money into the pockets of ordinary Americans—which is what the Republicans and the White House claim—it would be more effective to cut payroll taxes, which everybody pays.

To provide a bit of variety, I sort of wished the organizers had invited someone from the Freedom Caucus or the Wall Street Journal’s editorial page to defend the G.O.P. plan. But the plain truth is that the panelists were all correct. The Republican tax plan is based on false premises; it won’t give the economy much of a boost; it will raise the deficit; it will primarily benefit corporate shareholders and C.E.O.s. And, as Cuban said, it is a distraction from the great policy question of the day, which is how to insure at least a modicum of shared prosperity in an economy being roiled by technological change, global competition, and demographic transformation.

On Thursday afternoon, the House of Representatives passed its version of the G.O.P. tax plan, with only thirteen Republicans voting against it. The political action now moves to the Senate, where Republican leaders are hoping to push through their version of the tax plan immediately after Thanksgiving. So far, only a single Republican, Wisconsin’s Ron Johnson, has come out against the current version of the Senate bill. But the bigger story is that there should be broad G.O.P. opposition to this tax plan—and there isn’t. After all, this is a political party that, at the Presidential level and in many localities, has recently undergone a hostile takeover by a populist insurgency. A year after the election, how can it be staking its future on a tax plan that represents the antithesis of populism?

Here, once again, it must be noted that, for all his rhetoric, Donald Trump is a sham populist. Ignoring the pleas of his former adviser Steve Bannon, who advocated a tax plan that did more for his core supporters, Trump is championing a set of proposals that only a corporate C.E.O., a deluded conservative economist, or a self-serving plutocrat could love. If Trump wanted to help out the working stiff, why didn’t he take Cuban’s advice and call for a cut in the payroll tax? To pay for the reduction, he could also have proposed abolishing, or substantially raising, the payroll tax’s upper-income threshold, which enables someone who earns a million dollars a year to escape the tax on about seven-eighths of his income. Such a policy package could have boosted take-home pay, financed itself, and also helped to reduce income inequality.

But in going down this route, of course, Trump would have had to take on Mitch McConnell, Paul Ryan, and other Republicans on Capitol Hill. Beholden to ultra-conservative individual donors like the Koch brothers and Sheldon Adelson, but also to large corporations, which have traditionally financed the party, the current G.O.P. leaders will fight to the last for corporate and upper-income tax cuts, which eventually will have to be paid for by cuts in programs that primarily benefit the middle class and the poor. It’s the old G.O.P. playbook, one familiar to Newt Gingrich, Dick Armey, and Richard Darman.

At one point during the panel session on Wednesday, Cuban said that there were probably a hundred thousand people who could do a better job than Trump as President. At another point, he recounted how, in 2001, after he sold Broadcast.com to Yahoo, for about five billion dollars, he had to write a huge check to the federal government to cover his tax bill. His first thought, he recalled, was to wonder at the size of the check. And his second thought was: “What a great problem to have.” Maybe Cuban was just being a politician, but it is hard to imagine Trump or any other senior Republican politician saying such a thing.

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