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Tax Reform to Own the Libs

The GOP’s overhaul of the tax system reveals one of the party’s top political priorities: punishing Democrats.

Alex Wong/Getty

The Republican tax reform plan that was passed in the dead of night last weekend is not really a tax reform plan. Yes, it brings the corporate tax rate down to 20 percent, but it doesn’t do the one thing genuine tax reform is meant to do: simplify the tax code. Instead, if signed into law, the bill will make America’s already impossible-to-navigate tax code even more byzantine, likely requiring an expansion of the IRS to collect the necessary revenue. Its real innovation is political: The bill functions as a kind of enemies list, a grab bag of tax increases and other policy changes aimed squarely at Democratic constituencies.

Republicans have been open about this strategy. “It’s death to Democrats,” Trump campaign economic adviser Stephen Moore told Bloomberg. “They go after state and local taxes, which weakens public employee unions. They go after university endowments, and universities have become play pens of the left. And getting rid of the mandate is to eventually dismantle Obamacare.” Republicans have signaled that, having pushed a tax plan that would juice the deficit, they now plan to turn to entitlement reform to reduce that deficit. It’s an ambitious plan. This tax bill allows Republicans to continue their assault on Democratic states and constituencies and undo Democratic accomplishments, from New Deal programs to Obamacare.

Owing to the Senate’s arcane rules, a barrage of last-minute dealmaking, and the furious pace at which it was passed, this tax reform bill is a convoluted mess. But it’s also a revealing one, showing that the Republican Party is moving away from past priorities, like lowering the deficit, and towards an all-encompassing drive to explicitly punish their political opponents. In the tax reform bill, Republican constituencies, particularly the wealthy and corporations, are richly rewarded, while Democratic ones get the shaft. The bill, along with its messaging, are openly anti-Democratic in a way that is different from past Republican legislation. A handful of Democrats, for instance, voted for the Bush tax cuts.

The most notable change, from this perspective, is the removal of the state and local income tax (SALT) deduction, which adversely affects wealthier taxpayers in states like New York, New Jersey, and California. To an extent, this is unsurprising, given that a New York Times analysis found that “none of the senators representing the top 10 states taking the SALT deduction are Republicans.” Moreover, the areas that are hardest hit by this change are in urban areas like New York, San Francisco, and Washington, D.C.—all of which went to Hillary Clinton in the 2016 election by commanding margins. According to analysis from the Institute on Taxation and Economic Policy, New York, New Jersey, Maryland, and California would pay $17 billion more in taxes by 2027, while Texas and Florida, two large states that Trump won, would pay $31 billion less. “You can definitely see the ideological tilt here,” Carl Davis, the institute’s research director, told The Atlantic’s Ron Brownstein.

Under this provision, the wealthier are harder hit—most lower-income taxpayers who take SALT deductions would benefit from a larger standard deduction. Nevertheless, because property taxes fund public education, it could have a dramatic impact on lower-income people, too. “It would jeopardize the ability of state and local governments to fund public education,” NEA President Lily Eskelsen Garcia said in a statement expressing opposition to the House’s tax reform bill. “That will translate into cuts to public schools, lost jobs to educators, overcrowded classrooms that deprive students of one-on-one attention, and threaten public education.”

Fewer than 10 percent of all American children attend private schools, and a dwindling number of those are from middle- or working-class families. The GOP Senate bill, however, expands 529 savings programs—which were designed to encourage families to save for college—to apply to private elementary and high schools. While public school budgets will come under the ax, parents of private school students using 529 plans will pay tuition tax-free.

The House’s tax plan also targets college students, who voted for Clinton by large margins, by taxing tuition waivers as income—a change that could make graduate school unaffordable for many students. There are huge incentives for companies to embrace automation, which could have disastrous effects for the American manufacturing workers that Trump promised to help. Senate Republicans declined to include the bolstered Child Tax Credit proposed by Senators Mike Lee and Marco Rubio, which would have provided a modest cash benefit to low-income families. Meanwhile, the Senate bill doubled the estate tax threshold from $11 million to $22 million, which would provide a windfall for many rich people.

The biggest changes are yet to come. The Republican tax plan will add at least $1 trillion to the deficit, and Republicans are readying welfare and social service reform in response, which would mean that they would be demanding austerity measures to pay for a massive corporate tax break. Social Security, Medicaid, and Medicare—three programs championed by Democrats—could all be in trouble thanks to this bill.

This is all part of a larger truth about the Republican tax plan: Over the next ten years, many, if not most, lower- and middle-income taxpayers will see tax increases, so that Republicans can pay for their corporate tax cut and other giveaways to the rich. This, in a post-recession environment in which corporate America and the 1 percent have siphoned off huge gains, while wages for workers have been comparatively stagnant. This is not a winning electoral message. It would make sense, then, for Republicans to embrace Moore’s rhetorical strategy of noting that the tax reform plan sticks it to the Democrats. Tax reform is a nakedly political bill that attacks the GOP’s political enemies—and that message may be the best Republicans can offer in an era when tribal enmities are the single biggest force in politics.

This hastily conceived tax reform bill—some of which was sketched out in pen hours before the final vote—was not designed for policy reasons, whatever Republicans may say. Trickle-down economics has been revived with the same indifference to real-world policy that characterized Mitch McConnell’s assertion that this bill would actually be “beyond revenue neutral.” No, this is about politics. It’s the clearest evidence yet that today’s GOP has two animating principles: giving more to the wealthy (which appeases their donors) and owning the libs (which pleases their base).