Republican policymakers are confronting all kinds of challenges while trying to advance some kind of tax reform package, and near the top is a political problem: Americans don’t want to see the wealthy get another giant tax break, and that appears to be the centerpiece of the GOP plan.
For the most part, Donald Trump and his allies have largely dealt with this dilemma by lying – the president has repeatedly said working-class Americans would be the main beneficiaries, which is absurdly untrue – but Treasury Secretary Steve Mnuchin made a very different case to Politico this week. As Mnuchin sees it, Republicans are giving the rich a big tax cut, but only because it’s too darn difficult not to.
Mnuchin also changed course somewhat in his defense of the GOP’s tax blueprint, conceding it would slash taxes on the wealthy but that doing so was unavoidable because rich people already pay so much in tax.
“The top 20 percent of the people pay 95 percent of the taxes. The top 10 percent of the people pay 81 percent of the taxes,” he said. “So when you’re cutting taxes across the board, it’s very hard not to give tax cuts to the wealthy with tax cuts to the middle class. The math, given how much you are collecting, is just hard to do.”
This is amusing for a variety of reasons, but the phrase to remember is “when you’re cutting taxes across the board.” There’s some truth to the fact that if one starts with an across-the-board tax cut as the principal goal, those Americans at the top are bound to end up as the biggest beneficiaries in real terms.
But therein lies the rub: an across-the-board tax cut isn’t necessary. If Mnuchin and the other Republican architects of the party’s tax plan wanted to craft a less regressive proposal, it’d be incredibly easy to do so.
It’s a simple matter of political will. As Vox’s Matt Yglesias explained yesterday, shaping a more progressive tax-cut plan is pretty straightforward:
You’d start with some tax policy measures that benefit people at the bottom and the middle of the economic hierarchy. An expanded Child Tax Credit, something that some Republicans support, would help an enormous number of poor and middle-class families – especially if it were made fully refundable. An expanded Earned Income Tax Credit, including provisions to allow childless men to benefit, would do the same.
And then of course you could add in an old-fashioned rate cut. Drop the 10 percent bracket to 9 or 8 or 7 depending on your taste. Or modestly cut the payroll tax.
This isn’t rocket science, folks. Policymakers who want a tax plan that benefits working families can write a plan that benefits working families. Simply target those whom you want to help, and shape tax policy to direct resources their way.
Republicans, as Steve Mnuchin apparently conceded, aren’t doing that at all. Indeed, not only are they pushing an across-the-board tax cut that necessarily helps those at the top, they’re adding insult to injury by adding additional tax breaks – such as cutting the estate tax – that exclusively benefit the wealthiest of the wealthy.
This is the result of deliberate policymaking. Mnuchin presented these results this week as some kind of arithmetical necessity, but that’s ridiculous. Republicans have made a choice to help the wealthy, and that choice is reflected in their proposal.