Julian Zelizer: With his proposed tax cut, President Trump is giving the Republicans the red meat they have been craving.
And it may be very hard for Democrats to oppose him, Zelizer writes
Editor’s Note: Julian Zelizer, a history and public affairs professor at Princeton University and a New America fellow, is the author of “The Fierce Urgency of Now: Lyndon Johnson, Congress, and the Battle for the Great Society.” He’s co-host of the “Politics & Polls” podcast. The opinions expressed in this commentary are his own.
With his proposed tax cut, President Trump is giving the Republicans the red meat they have been craving.
After spending so many months toying around with his faux populist agenda, now the White House is really getting down to business. Coming at the end of this 100-day mark, President Trump’s dramatic proposal to cut corporate tax rates from 35% to 15%, slashing individual rates, eliminating the alternative minimum tax, and abolishing the estate and gift tax signals that he understands where his bread is buttered, and that is by the Republican majorities on Capitol Hill.
Of all the moves that he could possibly make, including the failed attempt at repealing Obamacare or the infamous border wall, supply-side tax cuts are the most effective way for him to solidify his partisan support, which will be important to his future success with legislation and the possibility of re-election.
Tax cuts have been bread and butter for Republicans since the conservative revolution that rocked American politics in the 1970s. Along with anti-communism, few issues have energized Republicans like dismantling the progressive individual and corporate income tax system put into place in the early 20th century.
Conservatives made a number of arguments about why taxes should be cut on the wealthy. “Supply side” economists claimed that if the government freed up upper income earners and business with lower marginal tax rates, investment would start to flow and everyone would benefit.
Other conservatives stressed that progressive taxes were unfair, a symbol of big government, and lowering them was the most effective way to put a stake in the heart of big government liberalism.
Just because wealthier people and organizations earned more than the middle class, it was not fair that the government should be required to pay a higher rate than lower income Americans.
Tax cuts skewed toward the upper income brackets play with well with the business and financial community that have often been big supporters of the GOP. In addition, shrewd conservatives like David Stockman, who served as President Reagan’s budget director, championed the “starve the beast” argument.
It’s a losing argument to convince Americans that government programs which they perceive as providing benefits should be cut. So if the Republicans wanted to shrink government programs, their best bet was to lower tax revenues, making less money available to Washington for spending.
For decades, Republican presidents have made tax cuts a priority. President Reagan pushed through a historic tax cut in the summer of 1981 that lowered the top rate from 70% to 50% for individuals and lowered corporate income taxes by over $150 billion.
“No other issue,” Reagan said, “goes so directly to the heart of our economic life.” In 1986, he worked with Democrats in Congress to pass loophole-closing tax reform in exchange for lowering rates once again.
President George W. Bush did the same in 2001 with a $1.3 trillion reduction (including the elimination of the estate tax), ending the era of federal surpluses that started under President Clinton, and again in 2003 even though the US was in the middle of a war. Bill Plante of CBS News recalled that “the younger Bush went around telling people, ‘Look, I’m more like Ronald Reagan than my father.”
Indeed, the big exception to GOP tax-cutting was President George H.W. Bush, who despite lowering the capital gains tax accepted tax increases as part of the 1990 deficit reduction plan. He paid the price. Conservatives like Congressman Newt Gingrich, future speaker of the House, never forgave him. And he wasn’t able to win a second term in his race against Bill Clinton.
It took some time for President Trump to get to the tax plan, but now it looks like he is going to send conservatives what they want.
While there are many economists who don’t believe that this tax cut would have beneficial consequences over the long term, especially by bursting deficits that will strain the nation, politically this could be a winning proposal.
Coming at a time when many Republican legislators are itching to deliver an important victory, this would have great appeal to the traditional constituencies of the Republican Party.
The corporate world, still uneasy with Trump’s populist rhetoric and attacks on free trade, might be a big more comfortable once they are delivered this benefit. And as Presidents Reagan and Bush realized, there are ways to package supply-side tax cuts with rhetoric and targeted sweeteners so that working class conservatives believe they will be sharing a piece of this economic pie.
Even though there is a lot of grumbling among Republicans about the impact on the deficits and proposals such as eliminating the deductions for state and local taxes, which will hit New York and California residents hard, Reagan also had trouble moving his tax bill in 1981.
After the assassination attempt on his life, Reagan came back and mounted a full-scale public relations blitz that was effective. Most Republicans who opposed him backed off. Democrats ended up adding provisions to the bill (compared to Christmas Tree ornaments) that benefited middle class Americans rather than trying to block it altogether.
It will be difficult for Democrats to fight back against President Trump’s proposals. While the House and Senate Democrats have found considerable room to obstruct and say no to President Trump, standing against tax cuts has often been one place the party feels vulnerable.
They all remember when Democratic presidential candidate Walter Mondale admitted in 1984 that if elected he would raise taxes, which gave President Reagan ample material to attack. Democratic senators from swing states will be uneasy taking a stand against tax cuts, even if they believe them to be irresponsible, for fearing of giving their opponents a powerful issue to campaign on.
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Unlike some of the other issues thus far, like refugee bans and health care, this is an issue that President Trump can’t afford to lose. This is one of the principal demands from Republicans of their president and it is an issue where the political dynamics in an era of united government point to success. This, more than anything, will give us a measure of what he can do on Capitol Hill.
If President Trump can get the tax cut back to his desk for a signature, this could be an important turning point in his policy agenda after the early turbulent months of legislating. Just this one victory, which would be a big one politically, could give him and the Republicans more than they need to take onto the campaign trail in 2018 and 2020 as they aim to keep control of Washington.