A middle-class tax cut? Hardly


By Doyle McManus



President Trump and his Republicans are still trying to sell their tax bill as a “middle class tax cut.” The middle class isn’t buying it — but that won’t stop Congress from passing some version of their plan.

The GOP’s tax proposal was always going to be a hard sell. Its centerpiece is a deep reduction in corporate taxes when most Americans think corporate taxes should go up, not down.

Even before the House and Senate unveiled their bills, about half of registered voters disliked what they were hearing, according to public opinion polls. Only about a third — essentially, the Republican base — said they favored the plans.

After weeks of salesmanship by the president and his party, those numbers haven’t changed much. A Quinnipiac Poll last week found that 52 percent of voters oppose the GOP plans; only 25 percent support them.

It’s easy to see why. Most voters say they don’t expect their own taxes to go down if either of the bills passes. They expect most of the benefits would go to upper-income taxpayers, not the middle class.

And they’re right.

The bills differ in details, but both would deliver most of their cuts to upper-income taxpayers. The Joint Committee on Taxation, Congress’s nonpartisan analysts, estimates that almost one-third of the benefit of the House bill would go to households earning $1 million or more. And that doesn’t count the impact of abolishing the estate tax, which would benefit only the upper crust.

Many middle-class families, especially in high-tax states like California and New York, would see their taxes go up. The House bill eliminates tax deductions for high medical expenses and student loans. The Senate bill would make corporate tax cuts permanent, but allow individual tax cuts to expire after 2025 — meaning every household would face a tax hike unless Congress intervened.

President Trump has frequently claimed that the bills wouldn’t benefit him or his family, but it’s hard to square that with the actual provisions. Tax experts have said that the abolition of the estate tax could save Trump’s heirs as much as $1.1 billion. And even as the bills eliminate middle class tax breaks, they preserve one for golf course owners — including, presumably, the Trump Organization.

A recent Politico poll found that most voters don’t believe Trump’s claim that he won’t come out ahead. (If the president wanted to prove that he’s right, he could simply release … Oh, never mind.)

The president and his aides have seemed most out of touch in discussing the proposed corporate cuts. In a recent television interview, Trump’s chief economic advisor, Gary Cohn, insisted they would “trickle down” to benefit workers — not a very populist idea.

“The most excited group out there are big CEOs,” he added.

But the evidence for that proposition is mixed. When Cohn spoke at a Wall Street Journal conference for CEOs last week, his interviewer, Journal editor Gerard Baker, asked executives to raise their hands if they plan to invest more should the tax bill pass. Very few did.

Cohn appeared taken aback. “Why aren’t the other hands up?” he asked.

The executives’ response was in keeping with the results of a survey this year by Bank of America: If companies are allowed to repatriate profits from overseas at a low tax rate, another provision of the bills, most say they would use the funds to pay down debt, buy their own stock or look for possible mergers — not invest in new jobs.

Plenty of mainstream economists think the tax cut is a bad idea for another reason: It will add an estimated $1.5 trillion to the federal deficit over the next 10 years.

“Economically, it’s a mistake,” Alan Greenspan, the former chairman of the Federal Reserve, said in a television interview. “We’ve got to get the debt stabilized.”

Despite all those defects, and rotten numbers in the polls, Republicans in Congress aren’t having second thoughts.

At this point, the tax bills aren’t about economic policy any more; they’re about political survival. A corporate tax cut is the centerpiece of Trump’s economic program. He and his allies have promised Republican voters and donors that it will pass. If they pass a tax cut — almost any tax cut — they’ll be able to claim credit for any improvement the economy shows next year, whether the tax cut deserves credit or not. But if they fail, they can expect a backlash from supporters already disappointed by the failure to repeal Obamacare.

A failure, Sen. Lindsey Graham of South Carolina said recently, would mean “the end of the Republican Party’s governing majority.”

“The party fractures, most incumbents in 2018 will get a severe primary challenge, a lot of them will probably lose (and) the financial contributions will stop,” he told NBC News.

It turns out, the majority of Americans who dislike the tax plan aren’t all that important to Republican leaders. As Graham said, it’s primary voters and donors who count.

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By Doyle McManus

Doyle McManus is a columnist for the Los Angeles Times. Readers may send him email at doyle.mcmanus@latimes.com.

Doyle McManus is a columnist for the Los Angeles Times. Readers may send him email at doyle.mcmanus@latimes.com.