Republicans won their final election in a small portion, due to a new appeal with working-class voters.
But the Republican economic agenda now helps the rich Americans, generally on Capitol Hill.
The cut has strained some Republicans about whether they are abandoning their new support base. Democrats are focusing on vulnerability and hammer Republicans with plans to give to the rich from the poor.
Who is harmed and helped by Republican plans is becoming a central question for GOP lawmakers as they try to narrow down the law through a narrow majority in Congress. On Tuesday, the House adopted a budget blueprint for $4.5 trillion tax cuts and $2 trillion spending cuts, along with an increase in new funds and debt restrictions for the defense and border programs.
The House vote was just the first step in what could be a broad pathway to turning the plan into law. The Republican Senate has its own ideas about the party's agenda, and the two rooms must agree to a broad stroke of legislation before passing it along the party's lines.
House Republicans who supported a budget summary this week said they hope the Senate will eventually tear the plan apart. Making mathematics work with a house plan almost certainly requires a cut in programs for poor people like Medicaid, which provides health care to over 70 million Americans. Jeff Van Drew, a Republican from New Jersey, said he pitched Trump to avoid deep cuts to Medicaid.
“He doesn't want hardworking people to cut Medicaid. He knows this is a new majority. It's a new majority of Republicans, and that's right,” he said. “The Senate is trying to straighten it.”
The expensive tax challenges of the Republican Party create difficulty. But their plans will evolve and they will want to cut taxes, and the party's fiscal Hawks are demanding that they cut their spending to fill that fiscal hole. As the federal government taxes the wealthiest people and focuses on much of their spending on the poor, a significant reduction in both tax and spending is either regressive or benefiting the wealthier people than the poor, analysts say.
“They cut taxes and cut spending in regressive ways, but this is also regressive,” said Kyle Pomerleau, a tax policy researcher at the American Enterprise Institute, a conservative think tank.
According to Treasury data, Americans' tax systems are progressive, with the top 1% of Americans paying more than 30% of the taxes they collect each year. So the tax cuts that Republicans want to enact means offering the greatest benefits to the richest Americans who pay the most in taxes. In other words, policy will regress even if money is returned to the working class.
Consider Republicans' top priorities this year. We will continue to cut taxes for the parties that were handed over to the law in 2017. Some measures that expire at the end of the year include lower marginal tax rates across revenue brackets, wider standard deductions and more generous child tax credits.
Most Americans see low taxes for the bill, and Republicans see it as a political order to maintain existing cuts. Doing so would be relatively few for poor Americans who don't pay much tax. An analysis from the Tax Policy Center, a think tank, showed that the bottom 20% of Americans, who make up to $33,900, would increase their after-tax income by an average of 0.6% ($130) if tax cuts were extended.
This is less than the 1.8% expected by think tanks on average. It is also far less than the 3.2% ($70,350), which increases post-tax income, which earns more than $1 million a year by extending tax cuts.
Republicans are considering additional tax cuts that could bring even more benefits to high-income Americans. Even corporate taxes that help the economy grow still flow mainly to owners of wealthy companies.
Another idea under consideration is to raise the $10,000 cap on state and local tax credits introduced as part of the 2017 tax cut. The so-called increase in salt deductions would be on high-income Americans who may, for example, borrow a lot of property taxes from their valuable homes.
Republicans defend tax plans. They claim it will help grow the economy and help raise wages for working-class Americans. Representative Joday C. Arlington, a Texas Republican and chairman of the House Budget Committee, believes that the pairing of spending cuts with tax cuts could potentially juice the economy by reducing the amount the federal government has to borrow to pay the tax cuts.
“So if you're cutting taxes, they'll say that crowding from private capital because you owe more will offset some of the positive economic growth potential coming from tax cuts,” he said this week. “But when you cut your spending, you're reducing that busy effect.”
Their plans are still preliminary, so Republicans haven't yet explained how they will achieve the spending cuts sought in the House budget blueprint. They say they don't want to take out health care from children and other vulnerable Americans, but many of them appear to be open to withdraw enhanced federal aid for adults, which is covered by the expansion of programs under the Affordable Care Act.
Under that law, the federal government pays much of the cost of providing care to Americans who earn up to 138% of federal poverty levels, worth $20,780 for individuals and $35,630 for a family of three.
Republicans are debating reducing the amount the federal government gives the nation to provide health care to its people. For low-income Americans, Medicaid losses can be a greater loss of value than the profits provided by income tax cuts.
“Reductions to Medicaid for low- and middle-income families are likely to overwhelm the tax cuts they get,” said Brendan Duke, senior director of federal fiscal policy at the Center for Budget and Policy Priorities.
During the campaign, Trump proposed a number of new tax policies aimed at working-class voters, including overtime, tips and Social Security termination taxes. Republican lawmakers don't know if they'll be able to find money to buy some of those ideas.
For some Republicans, pursuing an agenda that cuts taxes and cuts spending can be frustrating, given the way party support has changed over time. Such an agenda may have retreated some degree of political significance when Republicans received more support from rich Americans. That's not the case anymore, said Oren Cass, founder of the think tank American Compass and the leading voice of what is called a new right.
“They have this old script. They think they think they're supposed to be reading. “It's always been an incredibly ridiculous script, but that was something that the Republicans thought they should pursue, and now the Republicans don't think they should pursue it, but they're still blindly moving forward as if that's what they should do.”
