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Trump’s phony populism is fully exposed in the Republican tax bill

This bill is not for the forgotten men and women of America.

US President Donald Trump speaks to the press before departing from the south lawn of the White House in Washington, DC on November 21, 2017. / AFP PHOTO / ANDREW CABALLERO-REYNOLDS        (Photo credit should read ANDREW CABALLERO-REYNOLDS/AFP/Getty Images)
US President Donald Trump speaks to the press before departing from the south lawn of the White House in Washington, DC, on November 21, 2017.
Andrew Caballero-Reynolds/AFP/Getty Images
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

Donald Trump promised a presidency for the forgotten Americans.

“The forgotten men and women of our country will be forgotten no longer,” Trump said as he stood on the Capitol steps in January after taking the oath of office. “Everyone is listening to you now.”

Trump’s electoral success was supposed to signal that Republicans had tapped into populism abandoned by the left. But if anything, the Republican tax bill — which is likely the party’s only piece of major legislation to pass this year and is moving through Congress at lightning speed — does the opposite of what Trump promised. It is centered on one nonnegotiable point: cutting the corporate tax rate from 35 percent to 20 percent.

“The entire architecture of the bill is built around a permanent corporate tax cut, and everything else is meant to fit around that,” Jacob Leibenluft, a former Obama White House economist who is now at the left-leaning Center on Budget and Policy Priorities, told me.

(Several other tax experts, liberal and conservative, generally agreed with that assessment.)

Everything else — the provisions for the “forgotten men and women of our country” — could be bartered.

To comply with the Senate’s “budget reconciliation” rules, the tax bill would repeal Obamacare’s individual mandate, which would lead to higher insurance premiums and an estimated 13 million fewer Americans having health coverage. To fix the deficit problem within their own party, they have decided to make the individual tax cuts begin to expire in 2025.

Almost every independent evaluation of the House and Senate plans has found a $1 trillion tax cut for corporations and changes to the individual tax code that would benefit wealthier Americans while leading to millions of middle-class and lower-income people paying higher taxes than they do now.

This is not the populism that was promised.

Trump promised repeatedly to pass a tax plan for the middle class

This White House was supposed to drain the Washington swamp. The age of corporations wielding great power and influence, winning changes to federal policy that benefited them while the average American was locked out and left behind, was supposed to be over.

Over and over again, Trump promised that the big, beautiful tax cut Republicans would pass would be a tax cut for the middle class. He went so far as to claim that he himself, allegedly worth $10 billion, would not benefit. He pledged that he wouldn’t be swayed by the Washington lobbying class.

“Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households, not the wealthy and well-connected,” Trump said in September. “They can call me all they want. It’s not going to help. I’m doing the right thing, and it’s not good for me. Believe me.”

To the bitter end, Trump has continued to promise a tax cut for the middle class. He kicked off this week, when Senate Republicans are expected to put the tax legislation up for a vote, with the same message.

Republicans in Congress have picked up the president’s tune, evidence be damned.

“It lets every American keep more of what they earned,” House Majority Leader Kevin McCarthy (R-CA) said, a claim that PolitiFact rated false.

The real best defense of the tax legislation, from this perspective, would be that corporate tax cuts will lead to more investment in the American economy, more jobs, and higher wages, as Vox’s Dylan Matthews previously explained. There is a sincerely held belief among conservative economists and Republican lawmakers that reducing the tax burden on businesses will benefit everybody.

But as Matt Yglesias walked through last week, this was the same economic case for the George W. Bush tax cuts. It didn’t work out:

The theory was that by making it more lucrative to invest in American businesses, they would boost business investment in the United States — making our country home to more factories and offices, driving job creation, and pushing up wages.

What happened instead was a weak, highly inegalitarian period of economic growth that was associated with the drift of America’s manufacturing base overseas and an unsustainable debt-financed boom in house building.

And if you discard the trickle-down economic case for the Republican tax bill, there is very little left for most Americans in the long run.

The Republican tax plan doesn’t do what Trump promised

The centerpiece of the Republican tax bill is permanently cutting the corporate tax rate from 35 percent to 20 percent — which, in Trump’s defense, is something he was also pledging to do while he ran for president. He wanted to drop it even lower, to the unachievable rate of 15 percent.

But he has simultaneously promised huge tax cuts for individuals, and for the middle class specifically, those forgotten Americans, not the wealthy.

“The deal is so bad for rich people,” he told a group of senators earlier this month in a private call, according to the Washington Post.

Republicans are doubling the standard deduction, which is intended to lighten the tax burden for people lower on the income scale. They are expanding the child tax credit. But they are also eliminating tax deductions that the middle class relies on while then concentrating some of their plan’s biggest cuts — lowering the top individual tax rate and rolling back the estate tax — on the higher income levels.

Looking just at the individual tax changes, the Republican plan clearly benefits the wealthy more than the poor. The Tax Policy Center concluded that 10 years from now, lower-income people would see a slight tax increase, middle-class Americans would see little change, and people making more money would continue to see their taxes go down.

Urban Institute-Tax Policy Center

That’s in part because of a choice that Republicans decided to make. Their bill can’t increase the federal deficit after 10 years under the Senate’s “budget reconciliation” rules. Republicans were committed to making the corporate tax cut permanent — on the rationale that businesses need surety to make investments — and so the tax cuts for most people would be allowed to expire in later years to meet that requirement.

Exacerbating these trends, Republicans have also added the repeal of Obamacare’s individual mandate, which the Congressional Budget Office projects would lead to 13 million fewer Americans having health insurance and premiums increasing for those still buying coverage on the law’s marketplaces. Spending on Medicaid and the federal tax subsidies for lower- and middle-class Americans would decline.

Once all that math shook out on the House and Senate bills, the result was clear: On top of that deep corporate tax cut, wealthier people would benefit far more than the middle class and the poor. A chart from the CBO, via Vox’s Dylan Matthews, tells the story:

Congressional Budget Office

There is another stalking horse here that could imperil Trump’s campaign promises. The Senate tax plan would increase the federal deficit by more than $1 trillion over 10 years. Many Republicans claim a jump start in economic growth is going to offset that loss, but outside analyses are dubious.

If the deficit does continue to increase, there will be pressure to cut spending for Medicare and Social Security, the two biggest line items on the federal budget — and two programs that Trump promised he would not touch.

“Increasing the debt now for economically dubious — and undoubtedly regressive — gains could threaten Social Security and Medicare in the not-so-distant future,” Melissa Favreault, a senior fellow at the Urban Institute, wrote last week.

This tax bill is for Republican donors, for the party itself, and for Trump

So Trump’s grand tax plan would slash the US corporate tax rate by 15 percentage points at a time when most Americans say that taxes on businesses should be higher, not lower.

Pew Research Center

It would eventually lead to tax hikes for many lower-income and middle-class Americans, while tilting its benefits toward wealthier people and their families. Millions fewer Americans are projected to have health insurance if the bill passes. It could also, if the federal deficit continues to increase, put pressure on future Congresses to cut spending for Medicare and Social Security, programs that Trump pledged would be sacrosanct in his administration.

It is, in short, really nothing that Trump promised it would be. It is not for the forgotten people he has claimed to represent.

But this bill is for the wealthy Americans and major corporations that fill the coffers of Republican politicians to help them get elected. They would see their taxes cut — and they’re letting Republicans know they want this legislation passed.

"My donors are basically saying, 'Get it done or don’t ever call me again,’” Rep. Chris Collins (R-NY), who is close to Trump, told reporters recently.

It will, Republicans believe, help them get reelected in 2018 after their demoralizing failure to repeal Obamacare earlier this year.

"Well, I think all of us realize that if we fail on taxes, that's the end of the Republican Party's governing majority in 2018," Sen. Lindsey Graham (R-SC) said this month.

This bill would also have one other very notable winner: Donald Trump.

Despite his assurances that he would be a “big loser” under the plan, the truth is quite the opposite. The New York Times had estimated that the White House’s own tax proposal would have saved Trump more than $1 billion. The legislation Congress could ultimately pass won’t be exactly the same, but it contains many of the same provisions.

And here at the end of the Senate debate, Republicans are weighing one more big change to their tax bill. It’s not a further expansion of the standard deduction. They aren’t planning to expand the child tax credit even more and make it more refundable so more poor families would benefit. No, the Senate might further slash taxes on what are known as “pass-through” businesses, small firms that are taxed at the individual tax rate.

Perhaps the most prominent pass-through business in the United States? The Trump Organization.

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