The GOP Is So Screwed Up It Might Not Be Able to Pass Tax Cuts

Passing this bill should be so simple, the only debate is over size – but there are signs of defection in the ranks

Speaker Paul Ryan introduces the House GOP tax plan Thursday. Credit: Win McNamee/Getty

If you need evidence of how dysfunctional the GOP is right now, consider the difficulty Republicans are having with passing tax reform. Not only is their plan looking unlikely to pass, but they had a hard time even figuring out what to put in it.

That is truly incredible. Even the most casual observer of American politics knows that if the Republican Party can come together about anything, it's tax cuts. Conservatives hate taxes like Trump voters hate immigrants and books. Convincing a Republican to support tax cuts has been, historically, equal in difficulty to convincing a starving dog to eat steak. A group of Republicans debating tax cuts generally sounds like:

Should we cut taxes? Yes!

By how much? A lot!

For whom? The rich!

With majorities in the House and Senate and a Republican in the White House, passing a bill full of huge tax cuts should be so simple, the only debate is over size.

And yet here we are, with signs of defection in the GOP ranks. Making matters worse, Trump insists on picking feuds with John McCain, Jeff Flake, Bob Corker and other Senate Republicans, threatening to submarine chances of passage in the Senate. (With only a two-seat majority, three senators voting no would tank the bill.)

What does a massive tax-cutting bill so bad that even Republicans balk at it look like? Start with a staggering $1.5 trillion in tax cuts over ten years.

Sounds great, right? Well, you're not getting any of it. It consists largely of corporate tax rate cuts – more on that in a second – and repealing the estate tax.

Almost no one pays the estate tax, which is applied to inherited wealth. The GOP has been trying to deceive the public on this for two decades, calling it the "death tax." They very much want everyone to think the government will take half of their property upon death. The truth is no one with an estate worth less than $5 million pays this. Last year, the number of people who paid the estate tax upon death (less than 5,000) was vastly smaller than the number of people who died falling down stairs and ladders (around 13,000).

Trump loves to say the U.S. have the highest corporate tax rate in the world, which is seriously misleading. On paper, the U.S. corporate tax rate is 35 percent. In reality, thanks to millions of loopholes, deductions, exclusions and accounting tricks used to stash profits in safe places, most corporations are paying nowhere near the nominal rate – not even close.

The GOP plan overwhelmingly benefits people with very high incomes. Eighty percent (!) of the benefits would go to the top 1 percent of earners, or people earning over $390,000 annually. Is that you? I didn't think so.

Naturally, they expect you to pay for it.

The lengths to which House Republicans have gone to find a "pay-for" for this Christmas present to the rich is impressive even by their standards. They even floated capping individual contributions to retirement accounts like 401(k)s that are popular with lower- and middle-income earners – an idea that was so toxic, it had to be dropped from the plan released Thursday.

Worse, Thursday's plan proposes to eliminate the deduction for state and local income taxes from your federal tax return. Right now, if you live in higher-tax states like Illinois, California and New York, the amount you pay in state taxes and local property taxes can be deducted from your taxable income, as the IRS defines it. Republicans have proposed eliminating that deduction to save $1 trillion over ten years.

How does a group of "fiscal conservatives" justify $1.5 trillion in deficit spending? Stop me if you've heard this one before: The tax cuts will create so much economic growth that, they'll pay for themselves!

Since 1980, the country has been following this line of logic again and again and there is a mountain of evidence that it simply doesn't work. So-called supply side economics, with its "trickle down" promises, have been a disaster in practice even if some economists insist that in theory they are effective.

Another problem is that cutting corporate taxes is promised to spur job creation ignores the crucial fact that right now corporate America is sitting on over $2 trillion in cash reserves. Hiring is not sluggish because corporations lack money. It's sluggish because companies are investing in automation, relying on the gig economy and subcontractors rather than hiring full-time employees, and outsourcing overseas. They have money available to hire. Giving them even more will only continue the trend of skyrocketing executive compensation.

Republicans peddle this magic thinking regularly, but the lack of firm support for this massively expensive tax bill reveals that more than a few of them know that it no amount of positive economic growth is going to generate $1.5 trillion from thin air. Once the politically unpopular options that hurt working people are off the table, there is no way to pay for this turkey and they know it.

Things that seem impossible can and do happen in politics now. But a package of tax cuts so greedy, so carelessly thrown together, and so obviously "paid for" with magical bullshit that the Republican Party may not be able to pass it is something I never expected to live to see.

Yet here we are. What a time to be alive.