AGAINST THE GRAIN

Tax Reform Won’t Save the GOP in the Midterms

Republicans warn that they’ll face an epic landslide if the tax bill doesn’t get congressional approval. The tough reality: Their political fortunes are bleak whether it passes or not.

House Ways and Means Committee Chairman Kevin Brady makes a statement as his panel begins the markup process of the GOP's far-reaching tax overhaul on Nov. 6.
AP Photo/J. Scott Applewhite
Josh Kraushaar
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Josh Kraushaar
Nov. 12, 2017, 6 a.m.

Desperate for a legislative victory, Republicans have rallied around tax reform as the last, best hope to salvage their political fortunes. But while there’s plenty of policy reasons to overhaul the tax code, it’s far from clear that the GOP version of legislation will improve the party’s prospects in next year’s midterms.

Polling shows that the president will need to do a slick sales job to convince the public that they’ll benefit from tax reform. A recently-released NBC News/Wall Street Journal poll shows just 25 percent of registered voters approve of the Trump plan, while 35 percent oppose. A 40 percent plurality have no idea what’s even in the emerging tax proposal. These numbers, suggesting public unfamiliarity with a crucial White House initiative, are eerily similar to the early numbers on the failed Obamacare rollback.

Even more worrisome for Republicans: By nearly a 2-to-1 ratio, more voters think the plan will actually raise taxes (25 percent) than cut them (14 percent). Republican politicos desperately want to sell a “tax cut” to their constituents, but good luck making that case when tax cuts are being paired with the removal of deductions popular among many middle-class families.

The GOP can rely on the issue to gin up its partisans, with 54 percent of Republicans in favor of the Trump tax plan. But Democrats are more opposed than Republicans are supportive—making it hard to envision much bipartisan support behind a final package—and independent voters said the plan is a bad idea by a 7-point margin (29-22 percent).

If the White House had a record of successfully selling legislation to voters, it would be easier to believe that the administration could improve on these lackluster numbers. Instead, leading administration officials are casting the package in supply-side terms, emphasizing the macroeconomic gains from lowering corporate taxes instead of making the case that average Americans will have more money to spend as a result. As Trump’s chief economic adviser, Gary Cohn, told CNBC’s John Harwood this week, “We see the whole trickle-down through the economy, and that’s good for the economy.” These comments are a gift to Democrats, who are eager to cast the legislation as a giveaway to big business.

Meanwhile, Republican political strategists simply want the administration to emphasize “middle-class tax cuts” as the defining benefit of the legislation—figuring it’s a win-win proposition—but the reality is the emerging proposal isn’t a net-plus for everyone. Senate Majority Leader Mitch McConnell acknowledged as much Friday, saying he “misspoke” when he claimed that “nobody in the middle class is going to get a tax increase.”

To make up for lost revenue from corporate- and income-tax cuts, the legislation would roll back popular deductions for mortgage interest and for state, local, and property taxes. That would disproportionately affect upper-middle class voters in affluent states with high tax rates, many of whom could see their overall tax burden increase as a result.

As The New York Times pointed out, a disproportionate number of vulnerable House Republicans represent districts in these wealthy blue-state suburban districts. Of the 37 most-vulnerable Republican seats, according the Cook Political Report, at least 20 of them are affluent areas in high-tax states. California, New Jersey, Pennsylvania, New York, and Illinois alone are home to nearly half of House Democrats’ top targets in next year’s midterms. Most New Jersey and New York Republicans openly rebelled in last month’s House’s budget vote to protest the tax plan, making up 11 of the 20 votes in opposition.

The political calendar is creating the urgency for tax reform, not economic conditions or pent-up demand from voters. The economy has been growing steadily without any legislative tinkering. Tax reform is an issue that gets the entrepreneurial wing of the Republican Party excited, but it isn’t as energizing among the blue-collar voters who make up a growing share of the GOP. In swing-state Virginia, which shares similar demographics to many House battlegrounds, voters ranked taxes third behind health care and gun policy among their top issues in last week’s gubernatorial race.

Democrats are all too familiar with the pressure to pass legislation in hopes of forestalling political blowback. In 2010, they insisted that passing health care reform, despite its unpopularity, would be better than dealing with the stench of legislative failure in the midterms. They rallied to pass Obamacare into law—despite losing Ted Kennedy’s Senate seat—and suffered massive losses at the polls months later.

So in tackling tax reform, Republicans should focus on the merits of the legislation, not the politics. They will be facing fierce headwinds going into next year’s midterms, whether a tax package passes or not. As former Rep. Tom Davis, who chaired the House GOP’s campaign arm, told National Journal: “It’s a choice between passing an unpopular bill versus looking incompetent to govern.”

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