The Third Term of the Bush Administration

When thinking about what Republicans will do about taxes, this distinction between tax reform and tax cuts is useful:

Republican debates about tax policy are shrouded in a mist of obfuscation, since the party’s central goal, reducing taxes for the rich, is too unpopular to be described frankly. Instead, the intra-party strategy has been hashed out euphemistically, which has made the media coverage difficult to decipher. The terms “tax reform” and “tax cuts” have been thrown around almost interchangeably to describe the Republican plans. They’re very different. Tax reform is what Ryan and many of his allies say they’ll do, and possibly want to do. Tax cuts are what they will do.

Tax reform means a revenue-neutral adjustment of the tax code, which cleans out tax deductions and other preferences, and uses the revenue gained by this to reduce tax rates. The attraction of tax reform is that it avoids a drawback in Senate rules. The only kind of legislation that can pass the Senate by a majority vote, without being filibustered, is a budget-reconciliation bill. But these budget-reconciliation bills can’t increase the budget deficit after ten years. That requirement forced the Bush tax cuts to phase out after a decade. Republicans hope to avoid this fate by writing a bill that does not increase the long-run deficit. Hence their stated desire to pass tax reform rather than tax cuts.
If you’re trying to finance your rate cuts by closing tax deductions, though, you’re in a zero-sum exercise where every winner is offset by a loser. That is the dynamic that has forced Ryan and his allies to support the border-adjustment tax. The lure of this proposal is that it would, in theory, raise a trillion dollars over a decade, and the cost would be borne by the poor and middle class, who would pay more for imported goods. That would free up a trillion dollars in revenue that Ryan could use to cut taxes for the rich — the project that is the cause of his life and the central policy objective of the modern GOP.

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But just as throwing millions of people off their insurance proved too difficult, the pain threshold to pass a plan that raises taxes on Middle America will be far too high for Republicans to pass. One can already see Republicans who wanted to give Ryan’s grandiose strategy a chance nervously eyeing the exits, and looking instead at a tax cut that would expire. “For ten glorious years, we could actually pass a tax bill with what we want in it,” says Grover Norquist. “I want to make them permanent. But if my choice became, ten-year-temporary or nothing? I’ll take ten-year temporary,” says Representative Chris Collins.

Tax cuts for the rich financed by borrowing are not popular, but they’re much less explosively unpopular than tax cuts for the rich financed by tax hikes on Walmart shoppers. Cutting taxes for the rich enjoys near-unanimous institutional support within the conservative movement, the Republican Party, and its lobbyists and donors. Ten glorious years of low, low taxes for the rich will be the fruit of Republican control of government.

I would be absolutely shocked if this Republican conference could pass a sweeping tax reform law that even gestures at revenue neutrality. I would be…if not quite shocked very, very surprised if Republicans can’t pass a substantial mostly debt-financed upper-class tax cut. Ryan’s grandiose plan was always very stupid politically, and when it collapses he’ll be happy to take the tax cuts because as Chait says it’s the cause to which he’s devoted his adult life and he’ll take the half a loaf.

One of the few times Donald Trump has ever told the truth is in his criticisms of the Bush administration. So it’s something like rain on your wedding day that the likely core end product of the Trump administration will be massive upper-class tax cuts with a 10-year sunset and neoconfederate judges, granting that the foreign policy will involve fewer ground troops and even more indiscriminate bombing. Let’s just hope the second-term thing doesn’t happen again.