House GOP Abandons Some Tax Cut Promises In Submission To Class Warfare Narrative

WASHINGTON, D.C. – As it turns out, the House GOP ‘Tax Cut and Growth’ plan is a little duller than originally advertised. One surprise that blunts the heavily anticipated tax reform bill, and stands in direct contradiction to Republican promises of the last 8 years, is a hidden surcharge on incomes over $1 million.

The surcharge adds insult to injury, with the just released plan having left the top rate of 39.6 percent untouched.

From Politico:

“But a little-noticed provision effectively creates a new band in which income is taxed at over 45 percent.

Thanks to a quirky proposed surcharge, Americans who earn more than $1 million in taxable income would trigger an extra 6 percent tax on the next $200,000 they earn—a complicated change that effectively creates a new, unannounced tax bracket of 45.6 percent.

It hasn’t been advertised by Republicans, who have described their plan as maintaining the current top tax rate of 39.6 percent. And it goes against decades of GOP orthodoxy that raising taxes on the rich discourages work and reduces economic growth.

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The bubble tax also represents something of a break from nearly all Republican tax plans for the past few decades. Supply-side conservatives have long complained that the current tax rates on top earners are too high, discouraging work and reducing economic growth. House Republicans proposed lowering the top rate to 33 percent in the tax blueprint that they released last year. Over the past few weeks, faced with pressure from President Donald Trump to counter critics who said the plan is a giveaway to the rich and needing additional revenue, GOP leaders acceded to leaving the top rate unchanged. For a party that has focused intently on lowering marginal tax rates, it was a big concession.”

It is a big concession, indeed. Primarily because it concedes to the class warfare argument that the rich should be taxed more simply because they can afford to pay more and it furthers the redistribution that is a hallmark of socialist governments.

The Wall Street Journal agrees that the fumbling of true improvements on the individual tax rates side makes this, at best, ‘Half a Tax Reform,’ and a retreat on the ideological principles the GOP has long espoused.

“This top rate is a surrender to Democratic class warriors, though Republicans also fear that President Trump would sandbag them. No Members want to vote for a lower top rate and then have Mr. Trump tweet that they’re “mean,” as he did on health care. This is where presidential flightiness and lack of principle have a policy cost. Ideological surrender also gets Republicans nothing politically as Democrats are still attacking the House plan as a sop to the rich.

The overall impact of the individual tax changes is little reform but more income redistribution. The long-term damage to the tax-cutting cause will also be considerable. Adding credits and deductions for individuals makes rate-cutting that much harder since the affluent pay the vast bulk of all income taxes. The divorce of “pass through” and personal income rates will also make it even harder to reduce individual tax rates below 39.6%—ever.”

Whether soaking the ‘rich’ is intended to placate those worried about revenue losses, or appease the Left, it is ultimately a fool’s errand at the expense of individual tax payers. Congress does not have a revenue problem; they have a spending problem. And the Left will never give any credit for helping them wage class warfare. Nor will voters.

Liberty Leader Sen. Rand Paul (R-KY) shared similar sentiments in an interview on The Laura Ingraham Show on Fox News.

“Although Paul applauded some aspects of the bill’s content, he expressed disappointment, saying the proposed legislation as it now stands wouldn’t deliver the “significant tax cut” Trump and Republicans promised.

“If you don’t cut the top 1 percent, you don’t really have a significant tax cut,” Paul told LifeZette Editor-in-Chief Laura Ingraham. “What they’ve done is, they’ve bought into the class warfare on the individual side.”

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“For the individuals, it’s not as good as I would like. I would like to see every individual up and down get a lower rate, and particularly on the top part of the spectrum because the top part of the spectrum pays most of the taxes,” Paul continued.

But the Democrats have been particularly effective in pushing the narrative that tax breaks for the wealthiest Americans disadvantage poorer Americans, and many Republicans have found themselves convinced by portions of these emotional arguments, Paul suggested.

“We have to understand that the owners of our businesses — the people we work for — are richer than us. They pay more taxes,” Paul said. “But if you lower their taxes, they will either buy stuff or hire more people. If you raise their taxes, it goes into the nonproductive economy, which is Washington, D.C., and it will be squandered.”

As the House GOP plan faces debate, pressure from lobbyists, and hopefully principled stands from members of the Freedom Caucus, Paul and his fellow senators are on deck to take a swing at their version of a tax plan. The watered down results of the House plan do not portend well for the even more squishy Republican leadership in the senate.