Early Returns

Republicans' Tax Strategy Is Far Harder Than It Has to Be

Jonathan Bernstein's morning links.


Photographer: Drew Angerer/Getty Images

I'll admit: I'm completely baffled by the Republican reluctance to just accept that what they really want -- and what they have a chance of really getting -- is a simple tax cut. 

Instead, they're still playing around with the illusion of tax reform. But it's simply not happening. The latest is that they're already caving, apparently, on repeal of the deduction for state and local taxes. That's not the first time they've folded as soon as a little bit of pressure was applied by a vocal minority that would be harmed by a proposed provision:

Meanwhile, as Matt Yglesias points out, the Republican tax plan calls for "closing unspecified loopholes and deductions" -- which really makes it not much of a plan at all. It's all very well to announce target corporate and personal tax rates at the beginning of the process, but real tax reform sort of goes the other way around: It would eliminate as many exemptions, deductions and other special treatments as possible, then lower the rates to whatever level could be sustained thanks to the revenue generated. There's nothing wrong, I suppose, with announcing rate targets, but until they start actually coming up with some items they actually are willing to eliminate, even if there's pressure, then they just haven't done anything. Because one thing is certain: Any time Congress tries to eliminate a tax provision, those who benefit from it are going to be extremely upset. And they are often going to be the sorts of people Republican politicians very much do not want to annoy. 

The logical step would be to jettison all the "reform" elements of this and just go for a simple income tax rate cut, perhaps (as my Bloomberg View colleague Justin Fox suggests) supplemented by a payroll tax cut or an increase in some tax credits in order to make sure that the tax relief is widely shared. Yes, given Senate rules, the tax cuts would probably have to expire after 10 years, but even if Democrats take control at some point, they will be loath to allow taxes to increase for most of their constituents. Republicans could take those tax cuts to the House and Senate floors and see whether tax-cut fever is really surging through their conferences, or if any Republicans really do care about federal budget deficits -- or perhaps if some of them are nervous about Democratic attacks if they cut taxes on the rich.

If Republicans really believe that tax cuts will boost the economy, and big tax cuts will boost the economy, uh, bigly, then that would be a sensible course of action.

So why aren't they doing it? Do they really care about the tut-tutting charges of hypocrisy such a bill would draw? Seems hard to believe. Do they really believe that how the tax code is structured is far more important than simply how much money people must pay? Seems even harder to believe. Is it some sort of weird dysfunctional post-policy behavior in which they really don't understand the policy area well enough to act? Perhaps, but again: What they say they're trying to do is much harder than what they could do, and it has a slimmer chance for success. Is it driven by party-aligned interest group pressure? That's certainly possible, but I guess I'm not seeing evidence of that, either. 

I continue to suspect they'll eventually jettison any real pretense of "reform" and just try to cut taxes, but meanwhile the clock is ticking, they're not making significant progress, and it appears we're about to go through a series of retreats on one after another unclosed loophole and uneliminated special treatment. As I said, I'm baffled.

1. Seth Masket uses Hugh Hefner to explain why political parties have become what they are. Or, at least, this is a big piece of it. 

2. At the Monkey Cage, Kieran Healy on violence in the U.S. 

3. Greg Sargent on the important word Jimmy Kimmel won't say

4. Stuart Rothenberg goes into history and asks: What happened to the mountain Republicans -- the southern areas where Republicans were competitive during the days of the solidly Democratic South? 

5. And my Bloomberg View colleague Francis Wilkinson says Democrats should compete for the Alabama Senate seat up for grabs in December. 

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    Jonathan Bernstein at jbernstein62@bloomberg.net

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