Regrets on tax reform? Both parties may have a few

Democrats hate this tax bill. 

House Minority Leader Nancy Pelosi (D-Calif.) says it is “Armageddon” and the “worst bill in the history of the United States Congress.”

{mosads}But Senate Minority Leader Charles Schumer (D-N.Y.) sees political upside in the end of the world, promising the bill will be an “anchor around the ankles of every Republican” that helps Democrats clean up in the 2018 midterm elections.

He could be right.

President Trump will soon sign the most unpopular piece of tax legislation in almost 40 years, which is polling worse that the Reagan and Bush 41 tax cuts in 1981 and 2001 as well as the tax increases under Bush 43 and Clinton in 1990 and 1993.

Meanwhile, Democrats just opened up an 18-point lead in the generic congressional ballot, the biggest lead for either party since 2008. If this polling holds for the next year, Republicans are in trouble.

But it is also possible that Democrats—for reasons of policy and politics—will regret their strategy of maximum resistance to tax reform.

Most Americans say they don’t like this tax bill. But most also don’t know the details of what’s in it.

By early next year, 80 percent of Americans will begin seeing more take home pay in their checks thanks to lower tax rates and provisions like an increased standard deduction and child care tax credit—amounting to an average of $1,600 for all taxpayers and $870 for a middle-income family according to the Tax Policy Center.

Is it crazy to think that these families—buoyed by a bigger paycheck, an economy growing at 3 percent and a job market with the lowest unemployment in 17 years —might decide the tax bill isn’t so bad after all? 

Democrats will point to studies showing that the bulk of the tax bill’s benefits will eventually go to businesses and upper income individuals, but Republicans can point to millions of 2018 payroll stubs that show less worker money going to the federal government; a government the American people believe wastes as much as half of every taxpayer dollar, according to decades of Gallup polling.

Democrats should prepare for the possibility that Americans might be more swayed by what is in their 2018 paychecks than what the Congressional Budget Office says will happen by 2028.

If the public comes around on the tax bill, Democrats will face a double whammy. They will lose the political benefit of having been against it. And they’ll also be stuck with a tax law that pays for tax cuts for most American taxpayers and businesses by slashing benefits—like the state and local tax deduction—for Democratic-leaning states and constituencies.

Perhaps Republican leaders never had any intent to invite Democrats to the table on tax reform in the first place. Their decision to move the tax bill through the budget reconciliation process—which only requires 50 votes for passage in the Senate—certainly suggests they were prepared from the start to pass the tax bill on a party-line vote.

But Democrats also never offered a comprehensive alternative that might have forced Republicans to move in their direction. There were some exceptions. Earlier this year, the then 40-member House Problem Solvers—which is split evenly between Democrats and Republicans—announced its willingness to work on a bipartisan deal combining tax reform with infrastructure investment.

Sen. Joe Manchin (D-W.Va.) says he sent several tax reform ideas to the White House that were ignored. And in recent weeks, Rep. Josh Gottheimer (D-N.J.) joined with his Problem Solvers Caucus colleague Leonard Lance (R-N.J.) to propose a revised version of the Republican Senate tax plan that would be more equitable for blue states.

But most Democrats were content to just denounce the Republican effort, betting they could torpedo the tax bill much like they did the earlier Republican effort to repeal ObamaCare. They bet wrong.

But Republican leaders also erred in not taking more seriously the overtures of the Gottheimers, Manchins and other Democrats who really did want to constructively engage on taxes.

Republicans have been comparing their effort to President Reagan’s historic 1986 tax reform, but Reagan’s bill was developed over two years, featured countless public hearings and committee markups and ultimately passed the Senate with a healthy bipartisan margin of 74-23. The current Republican tax reform—developed over about two months and mostly behind closed doors—passed the Senate on 51-48 party-line vote.

Republicans seem not to care how the bill passed, only that it did. But they should care, and something House Speaker Paul Ryan (R-Wis.) said this summer explains why.

In arguing for the importance of permanent tax reform as opposed to just a temporary tax cut, Ryan said, “Businesses need to have confidence that we won’t pull the rug out from under them. They need the certainty from permanent tax cuts to hire more workers, invest in their businesses, and plan for the future.”

But there is nothing permanent or certain about major legislation that passes on a party-line vote. Look no further than the Affordable Care Act, which passed with only Democratic votes in 2010 and is now being gradually dismantled by Republicans. This Republican tax bill could face a similar fate if a Democratic president and Congress assume power in the future.

No one can say for sure exactly how the tax bill will impact our economy in the months ahead. But we do know that if both parties had actually worked together to pass it, that Democratic constituencies would have gotten a better deal and Republicans would have passed something more likely to last.

Ryan Clancy is the lead strategist for No Labels.