Andrew Harnik/AP Photo
Sen. Joe Manchin (D-WV), a key holdout vote on President Joe Biden’s domestic agenda, speaks to reporters on Capitol Hill on Wednesday.
In 2017, congressional Republicans assembled a plan, with no hearings, to upend the U.S. tax code. There were a couple of hiccups—a “border adjustment tax” eventually got forced out of the bill amid opposition, and the corporate rate moved around a bit—but in general, the large reductions in what wealthy Americans and corporations owe to the government moved smoothly and deliberately. From beginning to end, the whole process took a few months. As Mitch McConnell told The New York Times shortly after the final vote: “I didn’t have a single person say, ‘If you don’t do this, I’m going to vote no.’”
Meanwhile, Democrats, and I mean all Democrats, were united in their outrage, calling the plan a giveaway to people who disproportionately made use of the public commons and didn’t need the help. The Tax Cuts and Jobs Act did not receive a single Democratic vote in the House or Senate. Kyrsten Sinema, then a House member, voted against it. So did Joe Manchin, Mark Warner, and everybody else. And they kept up the opposition as a campaign applause line for the next four years.
The law turned out even worse than expected. Estimates from the Congressional Budget Office that the tax cuts would reduce revenues by $1.5 trillion over a decade soon ballooned to $1.9 trillion, and none of the promises Republicans made about the plan ended up becoming reality. If you sat any Democrat down today, they would not be able to tell you that the Trump tax cuts were good law that should be supported.
But their actions tell a different story. Bit by bit, Manchin, Sinema, and others who are hiding behind them are explicitly defending the Trump tax cuts, and ensuring they will remain intact. They have rejected virtually every attempt to raise revenue, while also insisting that the Build Back Better Act must be “paid for.” They should have just voted for the Trump tax cuts, because that’s their position today.
Manchin, Sinema, and others who are hiding behind them are explicitly defending the Trump tax cuts.
The Trump tax cuts actually solved a significant problem Democrats created for themselves, through the principle that all new programs in Congress needed to be “pay-as-you-go.” Because the plan included a mix of $6 trillion in tax cuts and $4.5 trillion in tax increases, suddenly there were trillions of dollars available to be rolled back and put toward the social programs Democrats have coveted for years.
The 2020 presidential primaries were in part a race between candidates on how they would use the repeal of those tax cuts and what they would devote the money toward. The Biden Jobs and Families plans made use of those proposals. The PAYGO problem was solved, and the only result would be a return to the tax code in place at the end of the Obama administration.
That wouldn’t cause any difficulties. Right?
The first bump came with the bipartisan infrastructure bill. Republicans didn’t want to repeal any of the Trump tax cuts, and systematically wrung all of them out of their proposal. But that wasn’t at all surprising: The tax cuts were Trump’s only real legislative triumph, and they were never going to be touched in a bipartisan agreement.
Then we got to the Build Back Better Act, a Democratic-only proposal to be executed through the reconciliation process. Thin congressional margins meant that one senator or a few House members are enough to kill the bill. So the supporters of the Trump tax cuts within the caucus—what else would you call them at this point—went to work.
Sinema kicked it off by rejecting any increases in tax rates on individuals, businesses, or capital gains. This was virtually the entire tax plan put out by the Biden administration. But Democrats wisely kept a “deus tax machina” waiting in the wings. The centerpieces included a tax on billionaires’ unrealized capital gains (the vast majority of their income and fortunes), a minimum tax on large corporations based on the profits they tout to investors, and a proposal to have bank account information sent to the IRS to tighten enforcement of tax cheats.
In other words, “the wealthy” was defined down to the nation’s 700 wealthiest households, and “rich corporations” defined to a couple hundred of the richest. Everyone else would see no changes and potentially even cuts. But that wasn’t good enough.
The extremely popular premise of Democratic social policy circa 2020, to roll back the Trump tax cuts and use the money to fund broad-based benefits, is dead.
It was Manchin’s turn. Backed by bank lobbyists, he scotched the IRS reporting requirements that had already been significantly curtailed by the administration. After previously indicating support for the billionaires tax, he called it “divisive” and appeared to rule it out. I’m told that there are still negotiations to get Manchin on board, but there are an untold number of Democrats doing the real work here, including Speaker Nancy Pelosi. Now the talk has shifted to a surtax on multimillionaires, building in new brackets but allowing the ultra-wealthy to still avoid tax on their vast asset holdings.
The minimum corporate tax has stuck—Sinema gave it a full-throated endorsement—but the Biden administration forced a redefinition of a “large corporation” as one earning $1 billion in profit rather than $100 million, cutting the revenue yielded from the provision in half.
What’s left—that scaled-back corporate minimum tax, and maybe some other odds and ends—is perhaps enough to offset spending on universal pre-kindergarten. The extremely popular premise of Democratic social policy circa 2020, to roll back the Trump tax cuts and use the money to fund broad-based benefits, is dead, because supporters of the Trump tax cuts killed it, on behalf of their billionaire friends and business interests. Democrats are standing up for the bold proposition that tax rates under Obama were too high, that corporations were paying too much, and that billionaires should be free to never pay a cent on the vast majority of their wealth really ever.
“Every sensible revenue option seems to be destroyed,” an irritated Senate Budget Committee chair Bernie Sanders (I-VT) told reporters on Wednesday. “Should we raise corporate tax rates, personal income taxes for the very wealthy? Of course, we should. But at least one person in the caucus doesn’t want to do that. Should we demand that the billionaires have to pay their fair share of taxes? Yes. There’s another person who doesn’t want to do that.”
Since all other options are out—progressive individual rates, corporate taxes, simply forcing people to pay what they owe under the current code—I have a modest proposal. It starts with making the Trump tax cuts permanent. Most of the individual measures were set to expire in 2025, to conform with budget reconciliation rules that say bills cannot increase the deficit outside the ten-year window. If Democrats aren’t interested in changing them, they should just admit it, and make them permanent. Surely no Republicans would vote against them.
Then, in reconciliation, Democrats could just move the expiration dates for the individual measures back to 2025, to where they are today. Relative to the law making them permanent, that would save around $1 trillion in the budget window, enough to get approximately the revenue necessary to offset the absurdly complicated half measures on the spending side. It may sound absurd, but the whole notion of a pay-for is also absurd, a budgetary fiction disconnected from the reality of how government finances work.
If there are too many Trump tax cut supporters among Democrats, surely they will agree to conjuring up “money” in a way that doesn’t affect the tax cuts whatsoever. Manchin and Sinema refuse to go back to the Obama tax code; will they be OK with going back to Trump’s?
