Tax Reform: The GOP’s Upscale Class War

by Andrew Stuttaford

Buried within this CNN comment (much of which is, of course, as you would expect) on the Republican tax plans is this interesting observation (my emphasis added).

But the congressional GOP, with Trump’s acquiescence, now has advanced proposals that actually impose costs on many middle- and upper-middle-class households to fund its benefits for the wealthy.

The Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, recently calculated that by 2027 half of all taxpayers would pay more under the Senate Finance Committee plan heading soon toward a floor vote. That includes nearly three-fifths of households just above and below the median income — and fully two-thirds of the middle-class households in the center of the income distribution. Even a clear 54% majority of the families in the upper middle class (those with earnings between the 80th and 90th percentile of all households) would face higher taxes under the bill. Meanwhile, 83% of families in the top 1% of earners would receive tax cuts that average over $42,000.

Class-based discussion of politics (compared with the depressing obsession with in my native land) is, beyond the obvious (the talk surrounding Hillbilly Elegy and so on) less detailed in this country than it should be, partly (but only partly) because there is still (I think) a comfortable belief that class is something that, beyond a few relics, the pre-Billy Valentine Louis Winthorpe III’s and so on, was largely left behind in the old world. There’s a lot to that, mercifully, but much less than sometimes assumed. For all his faults, Lenin knew a thing or two about politics and his brutal observation (“who, whom?”) that politics can ultimately be reduced to the question of who is sticking it to whom has implications for America too.  Raising  taxes on the middle class is (to me) a self-evident vote-loser, but the Republican leadership also ought to be thinking more carefully about the consequences of taking on the upper-middles, a productive, noisy and influential section of the electorate unlikely to overlook the fact that, so far as this tax plan is concerned, their interests have been clearly subordinated to the interests of the 1% or 0.1%. There’s no sign that it has. 

Now, you can think that’s fine. The upper middle class are, by definition, very, very far from the breadline, but the notion that, despite that happy state of affairs, they are incapable of feeling resentment towards those at the peak of the wealth pyramid is misguided.  Some may reach for the world’s smallest violin on hearing that, but, whatever the merits of their complaints, the fact that they will be real (and will probably matter in 2018 and 2020) is yet another reminder that, regardless of the possible economic benefits of the Republican plans (Ramesh took a characteristically measured look at them here; I’d probably be more pessimistic) the GOP is, politically speaking playing, with fire.

And consider this, if the end-result of the implementation of the GOP’s plans is to return the ever more left-leaning Democrats to power, we can be sure of this: What will be portrayed as  giveaways to corporates and, even more so, the 1%, will be quickly reversed, but once untouchable broader tax ‘breaks’ such as the SALT (state and local tax) and mortgage interest deductions will only be revived (if at all) in a form that ensures they are ‘properly’ progressive.

If that’s the case, the great GOP tax reform will turn out to be worse than the nothing that is wrongly assumed to be the only alternative.

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