How to Replace the Trump Tax Cuts Is the Story of 2020

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On Tuesday, Kamala Harris became the first 2020 candidate to call for the full repeal of the Trump tax cuts, taking aim at an unpopular law which delivered a large share of its benefits to the wealthy and corporations. She wants to re-channel revenue from that law into the LIFT Act, a lower- and middle-class tax credit for families making up to $100,000 per year.

This trade-out of a regressive tax cut for a progressive tax credit highlights something that every 2020 candidate is going to have to explain. Democratic voters will not expect a Democratic government to stick with a tax code change that has been rightly bashed since its introduction. They’re going to expect candidates who uniformly voted against that bill to call for its repeal. And they’re going to want to know what the candidates plan to do with the proceeds instead.

Among other things, this gets so-called big-government liberals out of a familiar box. Harris, in her Tuesday speech in Detroit, sneered at the common refrain, “How are you going to pay for it?” It’s a question always asked of Democrats to restrain their impulses, but never asked of tax-cutting Republicans. Elizabeth Warren has gotten around this by proposing a lucrative wealth tax and a minimum tax for corporations. But another retort, as per Harris, is to simply vow to repeal the Trump tax cuts.

“How are you going to pay for it?” is ultimately a stupid question—America has plenty of resources to make solid choices for the public welfare. It’s clear that deficit spending is propping up the Trump economy, and unless Democrats want to induce a slowdown to prove to the eight people who care that they’re fiscally responsible, they will need to continue the process.

But Democrats have placed themselves in a logistical straitjacket by passing PAYGO rules that require offsets for any new spending. Fortunately, Trump gave them a hand by supplying trillions of dollars of offsets in his tax law.

How much leeway does that give you? Harris endorsed a full repeal, which would score at approximately $1.5 trillion over ten years. To quote progressive economist Stephanie Kelton, there’s a good frame for this rhetorically. “The Republicans have said it’s okay to add $1.5 trillion to the deficit over the next ten years as long as we’re doing it for a good reason,” Kelton explained. “But you’re making your check paid to the order of big wealthy corporations and the richest people in this country … Our checks are going to go to the poor, the struggling, and the people with no health-care.”

However, you could double the $1.5 trillion figure and make it more politically popular at the same time, simply by focusing efforts on the most unforgivable, unseemly pieces of the tax law. That would include the 14-point cut to the corporate rate; the rollback of the inheritance tax on foreign earnings; the deductions for dividends on foreign earnings and other vehicles used by the rich; and a large tax break for so-called “pass-through” businesses that aren’t corporations, which also flow mainly to the rich.

Isolating and repealing those measures gets you around $3 trillion—other pieces of the law raised taxes to limit the final budgetary cost. And focusing on the corporate and estate provisions keeps intact more politically popular concepts like doubling the standard deduction and increasing the child tax credit. Functionally speaking, you can get away with calling it repealing “the Trump tax cuts” because Democrats have successfully branded them as primarily geared toward assisting the wealthy.

Now that you, 2020 candidate, have your $1.5 trillion or $3 trillion or whatever, the question then becomes what you plan to do. The Trump administration funneled that money upward, to those who least needed it. What are the alternatives from the would-be leaders of the Democratic Party?

Harris has staked out her position: Replace it with $3,000 a year for poorer adults, which could be taken as increments, almost like a paycheck, throughout the year. The estimated cost of the plan, $2.8 trillion over a decade, is just under the maximum amount of repealing the worst of the Trump tax cuts.

Is that the best option, especially when the LIFT Act needlessly freezes out the poorest Americans by requiring $3,000 in income for full benefits? There are certainly others out there. Bernie Sanders wants to enact Medicare for All and tuition-free college. Cory Booker favors “baby bonds” for newborn children born into working-class families. Amy Klobuchar has a $1 trillion infrastructure plan. Elizabeth Warren has about 20 plans that could do with some funding support, from universal child care to forgiving student debt. Jay Inslee would put public funds toward a Green New Deal, and several other candidates would join him.

The key here is that Democrats need to be specific about how they plan to re-channel the benefits of the Trump tax cuts. Both Joe Biden and Beto O’Rourke have nodded to some form of repeal without any specificity as to what to do in the aftermath. That’s unacceptable. If the Trump tax cuts are as unconscionable and favored to the wealthy as claimed, then you ought to have some conception of how those resources can be managed better.

I would argue that a tax plan supplanted with another tax plan is uninspiring. Even with the internet breaking our brains, most of us remember as far back as 2017, when we had a completely different tax system and things were … fine. The post-recession expansion was insufficient because of a premature pullback of useful spending. We have tons of needs, only a few of which presidential candidates have identified. An exchange of tax cuts for universal public broadband, or federal job pilot programs in areas that need them, or research into transformative energy science to prevent climate catastrophe would pay off well beyond re-ordering the tax beneficiaries.

This should be a dominant theme of the 2020 primary. Harris has laid down a marker. Democratic voters deserve to know how the main legislative accomplishment of the Trump era will be handled, and what their would-be leaders will prioritize.

 

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