As the tax reform bill goes to conference and Congressional leaders look for revenue to solidify the coalition of Republicans supporting tax reform, the Democrats are fully engaged in their decades-old attack on the GOP for “cutting taxes for the rich.”
This line of political attack dates back to at least 1982, when the Democrats ran their “Tin Cup vs. Champagne Flutes” ad in Reagan’s first mid-term election. Whether run as a TV ad in the eighties during “Knight Rider” or seen today as a segment on “The Rachel Maddow Show,” the narrative is not hard to decipher – Republicans are cutting taxes for their rich cronies at the expense of the poor and middle class.
While this narrative is probably good for Maddow’s ratings, the data show that it is not accurate; Census findings from 2016 show that the Democrats are actually the party of the rich.
Democrats represent nineteen of the twenty-five Congressional districts with the highest median income. The remaining six seats held by Republicans are all swing districts being targeted by the Democrats in 2018. This is not surprising, since these twenty-five districts gave Hillary Clinton 62.6 percent of the vote on average – 14 percentage points more than her share of the national vote.
In contrast, Republicans hold 59 percent of the middle class Congressional seats, as middle class is defined by the Pew Research Center. Republicans also hold 44 percent of the lowest-income Congressional seats.
Republicans are looking for revenue to lower taxes for the middle class, and are taking a political beating for defending tax cuts for the rich. The rich, however, are increasingly voting for Democrats, whose policies under Obama gave us lower than 1.5 percent annual economic growth on average and a declining middle class.
Congressional Republicans can solve two problems at once. First, increase taxes on the wealthy, and let their Democrat colleagues bear the political burden of advocating for lower taxes for their affluent constituents. The GOP can then use the revenue to further ease the tax burden on the middle class and small businesses.
One of the most burdensome taxes to middle class Americans is the so-called Cadillac Tax provision of Obamacare. Scheduled to be implemented in just two years, this 40 percent surtax on healthcare plans above a certain threshold would eventually hit all 178 million Americans who receive healthcare benefits through their employers.
A study by the City University of New York School of Public Health shows that the Cadillac Tax will most negatively affect Americans earning an income between $38,550 and $100,000 (in 2009 dollars) annually – a big chunk of the middle class. On average, it will take 5 percent of their income – between $1,900 and $5,000.
A study published in Health Affairs shows that small businesses, because they have less purchasing power, pay on average 18 percent more in healthcare premiums than large corporations. Small businesses, another key GOP constituency, will get taxed first and pay more under the Cadillac Tax.
Republicans can use tax reform to find the revenue, and the end-of-year tax extenders package to repeal the Cadillac Tax. While the main driver behind tax reform should always be good economic policy, we might be living in a time when good politics is good policy.
Steven Moore is public affairs consultant and a former chief of staff to a member of the House Ways and Means Committee. He is also a member of the Alliance to Fight the Forty, opposing the taxation of healthcare.