Why the Republicans’ Regressive Tax Cuts Are Unpopular

Posted in: Tax and Economics

Note to Readers: As many of you know from having read other columns on Verdict this week, we lost our beloved friend Julie Hilden this past weekend. Julie was the founding editor of Findlaw’s Writ, pulling together a group of ten regular columnists and many guest columnists to write on the then-new platform of an online legal affairs website. Several years ago, we moved as a group with Julie to Verdict. This enterprise would not exist without her hard work and vision.

For me, losing Julie is difficult and heartbreaking. I met Julie when she joined the parliamentary debate team at Harvard as a Freshman, and I was a graduate student who volunteered to coach the team. I would not claim that she and I were close, but I saw her as a selfless and unfailingly positive person who never had a negative word to say about anyone—an almost unheard-of quality on the snarky, hyper-competitive debate circuit. Julie was so modest and disinclined to talk about herself, in fact, that I did not even realize that she planned to go to law school, much less that she had been accepted at Yale.

Not too many years later, in December 2000, shortly after Julie had started Writ, I was discussing the presidential election mess with Michael Dorf (who is one of the original group of columnists that Julie assembled). Mike suggested that I contact Julie to pitch my idea as a guest column, which presented the delightful prospect of getting back in touch with Julie again. That column led to multiple guest columns and ultimately to my joining the roster of regular columnists.

Being back in contact with Julie was a pleasure, mostly because she brought such a positive point of view to everything that she did. Her editing style was pointed but not aggressive, and she was able to simplify my writing and bring it to life more gracefully than I ever would have been able to do on my own Because I tend to write on highly technical topics such as economic policy and tax law, I was especially heartened when Julie would tell me that my columns had clarified issues for non-specialists like her. Moreover, it was fully in character for her to respond to my emails with enthusiastic encouragement and reinforcement. I found myself looking forward to Julie’s emails, because I always felt more upbeat after reading them.

The difficult part of writing about Julie’s death, however, is that I have not really accepted that she is gone. She was an important part of my life, and for more than thirty years I could picture Julie with a smile on her face and an encouraging word on her lips. For the past several years, even though I knew that her remaining days were few, I never quite accepted that she would ever be gone. There are very few people whom I would call lovely, but Julie deserves that description in every facet of her being. She was kind, generous, a true friend, and one of the best people I have ever known. Those of us who knew her were lucky to have the time that we had with her, and we will miss her. Those who did not have the chance to meet her truly missed out. Her sunny outlook never faltered, and her goodness made the world a better place. I will not forget her.

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The Republicans passed their disastrous tax bill only three months ago, but with the unending onslaught of Trump-related scandals, lies, palace intrigue, back-stabbing, diversionary tactics, and simply terrible policy choices, it might as well have been a decade ago. In any event, Republicans are still trying to convince themselves that their tax bill is a bragging point rather than an embarrassment.

Indeed, there are reports that the Republicans will try to pass another regressive tax-cut bill as soon as they can. Although it is hard to imagine how that would work, simply given the number of days remaining on the legislative calendar, it tells us all we need to know about the Republican mindset that giving even more tax cuts to rich people and businesses would still be on their wish list.

It turns out that the new tax law is highly unpopular. I should clarify that it is still unpopular. Admittedly, there was a brief period a month or so ago when polls showed that the once-reviled tax cuts were doing somewhat better in public opinion polls, mostly because the Republicans were dishonestly calling them “middle-class tax cuts” and Democrats were not focusing on the issue.

Now, however, the tide has turned back against the Republicans, and the 2017 tax cut is once again polling notably badly. And those who are skeptical of polls can also look at what Republicans do as opposed to what people tell pollsters. Many observers have noted that, in the recent special election upset by a Democrat in Pennsylvania’s bright-red 18th congressional district, Republicans initially touted the tax cuts but found that voters were not impressed. It became so bad that Republicans chose simply not to talk about taxes for the last few weeks of a losing race.

Even in a desperate situation, then, Republicans concluded that they could not win by saying, “Hey, everybody, we cut your taxes!” Their most reliable form of pandering no longer works. What does that mean?

From the very beginning, I have argued that the Republicans’ regressive tax cut would be “a huge win for Democrats.” It was obvious to everyone that the tax bill was regressive, and even though some businesses were showing their gratitude to Republicans by turning every positive announcement about worker bonuses into media events, it remains true that the new law’s benefits are tilted overwhelmingly toward the wealthy and businesses.

Because they are true believers in the miracles of tax cuts, Republicans were also doing everything they could to get the Internal Revenue Service to change withholding rules to increase people’s take-home pay. Even though that would not actually increase the size of the tax cuts for working people, that unpleasant fact would not become obvious until April of next year, which conveniently is months after the 2018 mid-term elections.

Last month, House Speaker Paul Ryan even had to delete a tweet touting the $1.50-per-week increase in take-home pay that had supposedly “pleasantly surprised” a school secretary in Pennsylvania. The publicity stunt was simply embarrassing.

In a recent New York Times column, the economist Paul Krugman renewed his argument that the reason voters are no longer falling for the Republicans’ spin on tax cuts is that people now understand that Republicans will use the tax cuts as an excuse to cut Medicare, Social Security, Medicaid, and the other programs that middle-class people pay for and rely upon. Voters, Krugman argues, are “wising up” to the Republicans’ bait-and-switch tactics.

I made a similar argument back in December, and it is essentially an open secret that this is what Republicans are planning to do. Ryan has even admitted wistfully that he and his buddies dreamed about dismantling Medicaid when they gathered around beer kegs in college.

An important question, however, is whether it is possible that voters would oppose the Republicans’ tax bill even if Social Security, Medicare, and Medicaid were not on the line. That is, what if people did not expect the tax cut to result in cuts to those popular programs? Would voters be happy with a few hundred extra dollars per year if they somehow believed that their other benefits were not at stake?

I dubbed the Republicans’ new law the “stroke-the-rich tax bill” for a reason. If people know that the superrich are getting much more money than middle-class and poor people are getting, it seems to me that voters will punish the Republicans at the polls—no matter whether there are a few extra dollars in take-home pay every month.

Obviously, it is not that voters do not want to have more take-home pay. Their concern is about inequality, in particular the Gatsby-level extremes that have emerged in the US in the Reagan and post-Reagan eras. Even Donald Trump’s voters who want to “drain the swamp” understand at a gut level the impact that narrowly concentrated wealth has, not just on the economy, but on the political system.

Although I tend to be skeptical of claims made by those who tout game theory and behavioral economics, a famous model that takes people’s notions of fairness into account has rather consistently confirmed that people care not just about whether they have more money but whether other people “played fair.”

The most notable conclusions from that model are that “[p]eople are willing to sacrifice their own material well-being to help those who are being kind,” and similarly that “[p]eople are willing to sacrifice their own material well-being to punish those who are being unkind” (emphasis added).

That is, people become angry enough about others’ selfish behavior that they are willing to pay out of their own pockets to punish the bad actors. Similarly, studies in evolutionary psychology have identified what is known as “cheater detection.” The theory is that our brains developed to easily detect those who take without giving because detecting them was an adaptive advantage.

Of course, Democrats could make it even easier for voters by emphasizing to non-rich voters that repealing the Republicans’ tax cuts would be accompanied by a genuinely progressive tax cut, but apparently that is not necessary for many people to want to retaliate against Republicans’ plutocratic policies.

Democrats should, of course, push both lines of argument. That is, they should certainly remind voters over and over again that the Republicans’ tax bill is a ticking time bomb that will harm non-rich people very soon, when Republicans use the tax cuts to justify shredding retirement and health care programs, but Democrats should not hesitate also to emphasize the fairness argument.

Good old-fashioned left populism is still very potent, and for good reason. People justifiably despise rich people who raid the public purse for their own gain, even if the raiders are willing to toss a few coins to the rabble on their way back to their mansions.

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