// Read more here: // https://my.onetrust.com/s/article/UUID-d81787f6-685c-2262-36c3-5f1f3369e2a7?language=en_US //
You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

The Republican Tax Plan Is a Gift to the Next Democratic Majority

The bill will become a powerful tool for Democrats to enact big ideas like free college and universal health care.

SAUL LOEB/Getty Images

Liberals are rightly despairing after the Senate last week passed a sweeping rewrite of the tax code. The rushed bill included some huge drafting errors, so a conference committee with the House will have to iron out the kinks, with final votes in each chamber providing a final opportunity for resistance. But House and Senate Republicans share the same agenda: Shovel handouts to aristocrats and owners of capital and large corporations, while punishing virtually everyone else. Chances are, they’ll be able to fill in the details and finish the job.

It’s worth worrying about the country’s future under a tax regime that will skyrocket inequality, poke holes in the health care system, and re-engineer the economy so it works even more disproportionately for the upper class. But this legislation also gives cause for hope. If and when Democrats ever regain power, the tax bill will become powerful tools for escaping a straitjacket that always constricts their big ideas for economic redistribution. But they have to muster the political will to do it, which they’ve been unable to do in recent history.

The tax bill represents two separate plans: the largest tax cut in American history and the largest tax increase. The $4.5 trillion increase over ten years partially covers the $6 trillion cut, 80 percent of which will flow to the top 1 percent. The main tax cuts include a 15-point drop in the corporate rate; a significant rollback (or repeal—the House and Senate bills differ) of the inheritance tax on dynastic wealth; deductions for dividends on foreign earnings and other vehicles used by the rich; and a reduced rate for so-called “pass-through” businesses that aren’t corporations, like law firms or hedge funds or neighborhood stores. Rich people, like the Trump family, disproportionately use pass-through entities. The incentives in the bill are enormous for those who can afford fancy accountants to create them, and take advantage of the lower rates.

These cuts alone cost close to $3 trillion; a handful of last-minute giveaways to corporations push that number upward. Even one of the “revenue raisers” in the bill, a $300 billion boost by letting corporations who have earnings stashed overseas to bring them back home at a significantly reduced tax rate, is really a cut given how much potential revenue is being forgiven. But these regressive moves, while objectionable, also create $3 trillion worth of a sacred object in Washington: the pay-for, which is a deficit-reducing measure to offset new spending or tax reductions, leaving no overall impact on the budget. There’s even a law, known as “paygo,” requiring any deficit-increasing legislation to be offset with pay-fors.

Every time a Democrat (and really only a Democrat) proposes some new idea—free college, a giant tax credit for children or the working poor, a large-scale infrastructure program, even a basic income for every American—both Republicans and the media join in unison with the refrain that the country is broke and we just can’t pay for these priorities. Well, Republicans just found the money for $3 trillion in tax cuts for the wealthiest entities in society. Rolling those back to Obama-era levels creates a $3 trillion kitty for liberal initiatives. If you want college for all or universal health care or retirement security for every American, Republicans just carved out a significant path to doing it while satisfying budget rules and quieting the deficit hawks.

I haven’t mentioned the $4.5 trillion in tax increases in the bill. Many of these are regrettable—like new taxes on graduate students and medical expenses—and if included in the final bill they should be reversed. But Republicans had to grab at lots of ideas to finance their giveaways to the rich, and some are worth keeping, like capping the mortgage interest deduction and the deductibility of interest for corporations. You can design a different tax code that is more progressive, tweaking some pieces and retaining others, and still have that $3 trillion to put toward new programs.

In some cases, that might mean higher taxes for non-rich Americans. But if that’s the price for a progressive agenda, it’s a better position than the status quo politically, especially if those non-rich Americans get something tangible for their money. As Business Insider’s Josh Barro explains, “Because the GOP plan expands the base of taxable middle-class income, and because its tax cuts for the rich are so transparently indefensible, it will put Democrats in a better position in the future to argue for taxing the right things at the right rates.” Republicans are doing the dirty work of repealing some deductions, and that money can finally be put to better use.

Virtually every presidential campaign of the past three decades puts out a tax plan. The difference here is that candidates can now focus on that $3 trillion in giveaways to the wealthy, while pocketing the unwise deductions Republicans already swept away. With Republicans slashing taxes so irresponsibly and in such an unpopular manner, the next Democratic leader can simply call to “repeal the Trump tax cuts,” and transfer the windfall to worthwhile initiatives.

Unfortunately, when Democrats get into power they suddenly get cold feet about repealing their predecessors’ bills. Take the Bush tax cuts, which also tilted toward the rich. President Barack Obama and Democrats in Congress had a golden opportunity to repeal those tax cuts twice and put the money toward new priorities. The key provisions were on the verge of expiring in 2010 and 2012. But Democrats first extended them and then made permanent all but the rates at the very top, squandering the opportunity. The inheritance tax today is lower than it was before the Bush plan.

There are some caveats to the story. It would have been unwise to increase taxes as the economy recovered, though if those taxes were funneled into direct spending, the effect on the economy would be unchanged. The 2012 deal came when Republicans controlled the House, so Democrats needed to compromise. And most important, there were desirable middle-class tax cuts embedded in the Bush plan.

But the Trump tax cuts have no such distinction, as $3 trillion goes almost entirely to the wealthiest among us. And our politics have changed. The left wants bold ideas and new programs to solve the nagging problems that have decimated the middle class. They won’t settle for partial repeal. The Trump debacle offers a window of opportunity, but only if Democrats can identify and take advantage of it.