By now it has become clear Republicans want to use their newfound power to slather tax breaks on corporations and the wealthy. Donald Trump is flirting with hiring a doctrinaire supply-sider as his top economic adviser, and he has made tax cuts his primary pitch to prevent companies from shipping jobs overseas. Chief of Staff Reince Priebus has indicated that tax reform will consume the congressional agenda for the first year of the Trump administration, and nothing from Mitch McConnell or Paul Ryan so far refutes that.
You could be seduced into thinking that this will give Trump a quick and easy victory. After all, every Republican believes in cutting taxes as a prerequisite for membership. And with budget reconciliation, they won’t need a single Democratic vote—that’s how George W. Bush got his tax cuts passed in 2001 and 2003, in fact. But tax packages aren’t easy to assemble, especially given all the moving parts—politicians clinging to pet ideas, warring factions in the House and Senate, and special interests seeking to maintain handouts. Reconciling all of that will take serious legislative skills—something in reduced supply at Trump Tower.
Trump has spent the past several months signaling he will defer to Congress on the details of any plan. His initial blueprint got modified into something that resembles the “Better Way” House GOP plan engineered by Paul Ryan, with its three individual brackets and a top marginal rate of 33 percent. On corporate taxes, Trump has asked for a 15 percent rate, while Ryan goes with 20; but the structure is virtually identical. Trump also moved to the House’s side on a controversial S-corporation tax rate (allowing businesses and partnerships to pass through earned income, with benefits for small-business owners and hedge-fund managers alike), initially set at 15 percent but since dropped.
Both Ryan and Trump have established various red lines that could prove difficult. For example, breaking the laws of mathematics, the House plan claims that “no income group will see an increase in its Federal tax burden,” that no new taxes will come into the system, and that it will be “revenue neutral.” Trump’s Treasury secretary nominee, Steven Mnuchin, similarly vowed that “any reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class.” These promises contradict all independent analyses of the plans, which confirm major reductions for the wealthy.