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Donald Trump Is Raising Your Taxes, and Republicans Won’t Stop Him
The
President’s partial tariff retreat still leaves his biggest import
taxes in place, and the Congressional Republican tax cut plans won’t
offset them.
by Bill Scher
“God put the Republican Party on Earth to cut taxes. If they don’t do that, they have no useful function.” — Robert Novak
On
Wednesday, President Donald Trump put a 90-day pause on some of his
tariffs. On Thursday, House Republicans approved the Senate’s budget
resolution, which is a precursor to passing filibuster-proof “budget
reconciliation” legislation that cuts taxes. Are we seeing the return of
the traditional Republican Party, the one you can count on—no matter
the economy—to lower your tax burden?
Nope.
Trump kept tariffs in place that increase your taxes. And the budget
reconciliation bill is unlikely to lead to a net tax cut, especially for
those in the working class who are hit hardest by giant import duties.
Trump’s partial retreat, prompted by the panic
that was spreading in the typically calm federal bond market, still
leaves in place a 10-percent base tariff on imports from nearly every
country, with Canada and Mexico tagged for 25 percent and China, the
world’s second-largest economy, at 125 percent; another 25 percent
tariff on steel, aluminum, and automobiles; another 10 percent for
Canadian energy; and a 20 percent tariff penalty on China for lax
fentanyl enforcement.
The Budget Lab at Yale
calculated the impacts of this tariff regime (except for the fentanyl
penalty on China) if it sticks for 10 years. It estimated the feds would
collect $2.4 trillion in tariff revenue. The average household would
lose annual purchasing power of $4,364 thanks to the Trump tariffs.
What
size tax cuts do Congressional Republicans have in store? The newly
passed budget resolution allows for $5.3 trillion in tax cuts over 10
years, but $3.8 trillion of that is the cost of extending 2017 tax
provisions enacted due to expire soon. Only as much as $1.5 trillion would be for new tax cuts, not enough to offset the president’s mammoth $2.4 trillion tariffs.
Furthermore,
the distribution of the tax benefits is unlikely to track the
distribution of the tariff pain. Tariffs are inherently regressive.
Poorer households pay a much larger share of their income for goods than
wealthier households. Plus, many households are too poor to pay any federal taxes and, therefore, stand to gain nothing from federal tax cuts despite shouldering the costs of tariffs.) But tax cut proposals promoted by Trump, such as the elimination of taxes on Social Security income and overtime pay, might sound friendly to lunchpail Joes and Janes but skew the benefits toward higher-income households.
Precisely
where Trump’s tariff increases and the Republican tax cuts finally land
remains to be seen, but this is a classic case of the right hand not
knowing what the far-right hand is doing. The budget resolution squeaked
through Congress despite disagreements between the Republican factions
on how big the tax and spending cuts should be. Trump’s tariffs, as
we’re painfully learning, can change at any time. The global economy may
stagger in uncertainty for the next three-and-a-half years, careening
because Trump woke up on the wrong side of the bed and wants to slap a
new tariff on an industry or country.
Congressional
Republicans could impose certainty on the situation. They could partner
with Democrats to strip Trump of unilateral tariff-hiking powers in big
enough numbers to overturn a veto. Legislative measures have been introduced already. One eked through the Senate last week with the help of a few renegade Republicans but isn’t getting House consideration.
Calling
on supine Republicans to break with Trump sounds ludicrously
unrealistic. But without that break and short of complete surrender on
tariffs by Trump, Republicans will be using their governing trifecta to
raise, not lower, the net taxes of Americans. According to the late
conservative columnist Robert Novak, that would render the Republican
Party without a useful function. At a minimum, it would raise the
question: What does the Republican Party stand for beyond fealty to a
tax-raising Donald Trump?
Click here to read this article on washingtonmonthly.com.
Bill Scher is the Politics Editor at the Washington Monthly. |