I Was Wrong: Tax Cuts Edition
I was very wrong about the GOP tax proposal. From November 6th, 2017:
I do not expect a bill materially resembling the TCJA to be signed into law.
So that was interesting. And I was right in the sense that the name didn’t survive the Byrd Bath, but a lot of the TCJA lived on in the eventual Senate bill. While it’s now some time in the rearview mirror, it’s worth looking backwards to see what we can conclude, and what we’ve learned about Congress.
- Public opinion and constituency opposition wasn’t determinative.
- I thought the bill was doomed because cutting corporate taxes while raising individual taxes would be horrifically unpopular and would also provoke fierce opposition from many influential lobbying constituencies (e.g., charities). It was and did! I thought this was going to force leadership to a more modest and more popular bill; instead they managed to whip through a real dog. It doesn’t speak well to Paul Ryan’s policy vision, but it does speak to very effective caucus management by Senator McConnell.
- The bill did get somewhat better, politically-speaking
- Better in the sense that some of the most odious and most unpopular provisions (not necessarily one and the same) were dropped or highly modified. Which argues for a reckless indifference to, rather than ignorance of, public opinion about the bill. Legislators figured out the worst pain points and dropped them to sweeten the medicine.
- I underestimated procedural gimmicks.
- This one’s a gimme. The TCJA didn’t even come close to meeting the long-run reconciliation guidelines; I viewed that as a problem they’d have to resolve. Instead the GOP took the easy path by having the individual rate cuts sunset midway through the 10-year window. Cheap, but it worked well enough.
One thing I stand by – the TCJA’s policy gains are unlikely to be stable or defensible. Its primary achievement was cutting corporate taxes, and raising corporate taxes is pretty popular. It provides a nice platform for Democrats to run on in every subsequent election promising to expand social welfare programs (popular!) by raising corporate taxes (also popular!). It also raised individual taxes and moved to a lower inflation calculator that will raise them gradually over time. Net-net, I wouldn’t be surprised if TCJA is paving the way for substantially higher tax revenue 10 years from now; but I’ve just been reminded that prediction is a mug’s game.