We keep hearing that the GOP is deeply, existentially conflicted over whether to evolve into a “working-class party.” Senator Josh Hawley declared as much in The New York Times, urging his party not to slash the safety net to fund “corporate giveaways” for the party’s “C-suite” donors. He warned that Republicans are “having an identity crisis” over whether to be a “party of working people” or keep ministering to its “Wall Street wing.”
Yet a funny thing keeps happening: One side of the GOP’s argument over its identity—and one side only—keeps winning. Guess what: It isn’t the one that wants the GOP to be a “working-class party.”
Case in point: Buried in the new House GOP reconciliation bill—the blueprint for Trump’s agenda—is a new and expanded giveaway largely benefiting wealthy investors, according to tax experts I spoke to. And the nitty-gritty of this neatly demonstrates how the “corporatist” side of the alleged GOP identity crisis is winning out.
To see why, recall that Trump recently got lots of media attention for supposedly wanting House Speaker Mike Johnson to use the bill to close the “carried interest loophole.” That provision lets investment fund managers pay far lower tax rates on profits—a glaring example of the rigging of our tax code in favor of wealthy elites. Trump totally wants to raise taxes on the rich, credulous headlines screamed. But after Republicans protested Trump’s demand—and after private equity lobbyists got to work—Trump backed off rather meekly.
Result: The GOP bill does not end this loophole. As Punchbowl News puts it, this constitutes a “big victory to hedge fund managers, private equity executives, and their lobbyists.”
But it’s actually worse than this, tax experts tell me. That’s because the GOP bill also creates a whole new tax benefit for precisely these types of wealthy investors, the experts say.
“Republicans could have closed the carried interest loophole,” Michael Linden, campaign director for the advocacy group Families Over Billionaires, told me. “Not only did they not do that, but the GOP bill opens up another tax break for private equity that didn’t previously exist. The private equity lobbyists win again.”
At issue is a provision of Trump’s 2017 tax law, which overwhelmingly benefited the rich and corporations. The provision is a deduction for “pass-through” entities, which pass income through businesses to owners, who then pay the taxes on it. Income that flows through these businesses disproportionally goes to the wealthy, so this provision benefits them.
The new House GOP bill—which extends many of Trump’s 2017 tax cuts—also expands that particular provision, these experts say. It raises the amount these businesses can deduct. And it extends the deduction to so-called “Business Development Companies.” These are vehicles that facilitate passive investments; the rationale for extending this deduction is that it might make capital more available.
But according to analysts at the Tax Law Center, the investors this would benefit are mostly rich ones. “Wealthy people invest in BDCs,” says Michael Kaercher, the Tax Law Center’s deputy director. “This change benefits an overwhelmingly wealthy investor class that typically invests in exotic vehicles like this one.”
Brendan Duke, senior director at the Center on Budget and Policy Priorities, notes that this contradicts Trump’s feints toward raising taxes on wealthy investors. “The GOP bill actually creates a new tax break for the same private equity industry,” Duke said.
This change will forgo an estimated $10 billion in revenues. That might seem small in the larger scheme of a multitrillion-dollar bill. But it’s precisely through these incremental, largely invisible gamings of the tax code that the wealthy keep skewing it in their favor. And it’s a sizable tax break for them.
Somehow the “C-suite” side in the GOP identity crisis keeps winning out.
Take Medicaid cuts. Trump has recently been insisting that the GOP won’t cut Medicaid. While the GOP did shelve its most extreme Medicaid cuts, the new budget contains work requirements and other bureaucratic trickery that’s plainly designed to push people off the program: Indeed, this could result in an estimated 7.6 million people losing coverage.
Let’s pause to appreciate how the Trump-GOP game works here. When Trump claimed he didn’t want Medicaid cuts, headlines either gullibly amplified this claim or suggested it somehow creates a genuine dilemma for Republicans, suggesting Trump sincerely doesn’t want Medicaid cuts and Republicans are struggling to work around that.
But note that when Trump says he opposes cuts, he frequently adds that he’d be fine with cutting “waste, fraud, and abuse.” That actually created the path that Republicans are utilizing: Our bet is Trump will now claim that the work requirements are only removing people who defraud the program, and don’t actually constitute cutting it. But that’s nonsense: Many people on Medicaid already work, and work requirements could push off enormous numbers of people who aren’t defrauding the program at all.
Shocker: The “C-suite” wins!
Or take the subsidies for the Affordable Care Act that were expanded in the 2021 recovery act and will expire this year. Trump’s pollster recently released a memo warning that working-class voters overwhelmingly support extending these subsidies. This was clear notice from some inside Trumpworld that letting them lapse would hurt Trump’s working-class base. But House Republicans just defeated an amendment in committee that would have extended those subsidies. If they lapse, it could result in millions more people losing coverage, many of them in Republicans’ own districts.
The “C-suite” wins again!
The “waste, fraud, and abuse” canard is a revealing one. Republicans are citing this—along with the need to reduce deficits—as their rationale for downsizing social insurance. But that’s primarily designed to disguise their real reason for it: offsetting more tax cuts for the rich, which they wouldn’t be pushing if our fiscal plight were a real concern. As Jonathan Cohn writes for The Bulwark: “Republicans are cutting Medicaid because of their priorities and philosophy, not fiscal necessity.”
In his Times op ed, Hawley got this key point right. He noted not only that working-class voters like social insurance but also that if Republicans implement these cuts, it will reflect the GOP’s genuinely held principles—how they just do affirmatively favor the interests of the party’s corporatist wing, precisely when it takes money and security away from the working class.
At its core, the promise of Trumpism, at least in its idealized forms, is supposed to be all about the idea that working people have gotten screwed by a rigged economy for a half-century, and that to rectify this, Trump will end the elite gaming of it. But the new tax break for wealthy investors smuggled into the GOP bill—the same one that takes a hatchet to programs benefiting working people—perfectly epitomizes exactly this sort of elite rigging.
The GOP “identity crisis” doesn’t appear to be much of a crisis at all. Most Republicans appear to know exactly what they truly believe—and who they really represent.
