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Wednesday, November 1, 2017

Big-Spending Republicans Seek Tax Hikes on Blue States

From its inception, the Republican Party has been about bigger, more intrusive government. Things have not changed.

Ten days ago, Republicans passed the first $4 trillion federal budget in U.S. history, a version of which narrowly passed the House on Thursday. At $4.1 trillion, the budget represents an approximately 5% increase in spending over the last fiscal year of the Obama administration and sets the stage for President Trump to do what every GOP president has done since WWII: increase spending far more than did his Democratic predecessor.

A History of Spending Increases

Simple arithmetic will tell you that if spending increases, either taxes or deficits must increase, too. But although the GOP has been happy to let deficits explode in the past, they will have a harder time defending them this time around after their eight-year assault on Obama’s deficits, which increased debt from $10 trillion to $20 trillion.

Therefore, Republicans are going to have to raise taxes to avoid bigger deficits. They have set out to do exactly that to their political opponents while cutting taxes for their supporters. All of this makes their current narrative about eliminating the state and local deduction from federal tax liability especially unseemly. They claim the deductions force low tax states to subsidize high tax states like California, but that’s not true. California and New York pay more in federal taxes than they reap in federal benefits.

Save the excuse that some of those Republican presidents had Democratic Congresses. That isn’t to defend the egregious taxation in states like New York. But as Republicans love to remind us, the wealthiest 20% of Americans pay most of the income taxes and most of those people live in blue states Republicans are targeting for effective tax hikes. To raise spending by $200 billion and then claim the moral high ground based on fake news is exasperating even by Washington’s standards.

Besides paying for their profligate spending, Republicans probably hope eliminating the state and local tax deduction will encourage more people to leave blue states for red states, a trend already well-established before this past election. President Trump said as much with his customary subtlety back in July. Republicans would like nothing better than to see electoral votes decrease in deep blue states like New York and California and increase in red states like South Carolina and Georgia.

Assuming people leaving blue states over taxes will mostly vote Republican, this may also shore up traditionally red states like Texas which are showing signs of turning purple.

Unfortunately, the GOP’s Jedi mind trick will likely work with enough of the party’s base for Congress and the president to get away with this. That’s because in Republican Neverland, where tariffs aren’t taxes and “infrastructure,” the military, and other boondoggles conservatives like don’t constitute government spending, strengthening red states and weakening blue states will move American towards “smaller government” and more freedom and prosperity.

But in reality, the government grows exponentially when Republicans occupy the White House. The two-term presidencies of George W. Bush, Reagan, and Ford/Nixon all approximately doubled federal spending, while Clinton’s and Obama’s raised them a mere 25% and 28%, respectively.

And save the excuse that some of those Republican presidents had Democratic Congresses. It’s not like Reagan ever asked for a 25% cut and Congress overrode him with increases. Reagan consistently proposed huge increases in spending and Congress largely gave him what he asked for, merely shifting a little spending around at the margins.

Mission Creep

And it’s not just spending. Most of the federal government’s mission creep can also be traced back to Republican presidents, who created the Department of Health, Education, and Welfare (today HHS and the Department of Education), the EPA, and the spectacularly destructive “war on drugs,” just to name a few of their greatest hits.

The crowning irony of this dastardly tax move is its winners and losers. Yes, the so-called “coastal elites” may take a little hit by not being able to write off state and local taxes. But even the top 10 percent of income earners represent a wide disparity in incomes. When your income is in the tens of millions, income tax increases might mean holding off on a third house or an extra yacht. And when it’s in the tens of thousands, it doesn’t affect you anyway.

The Republican Party and indeed, conservatism itself, is about big government, authoritarianism, and empire. But if your income is between $100,000 and $200,000, for example, those extra taxes may represent what you would have saved for your child’s college tuition, meaning you’ll have to borrow it instead. Or, it might mean the difference between hiring that extra employee to grow your small business.

It’s precisely these people, who are by no means rich, who will bear the brunt of the GOP’s politically-motivated tax redistribution. And it just so happens that policies like this one further insulate the very richest 1 percent from the competition represented by upwardly mobile 10 percenters, many of whom work seven days a week to rise out of paycheck-to-paycheck, wage-earner status.

There are a few Republicans who sincerely want to cut the size and scope of the federal government. Senator Rand Paul tried to convince his party to cut a measly $43 billion from Washington’s gargantuan military budget. That’s a mere 4% – 6%, depending upon how honest you are about acknowledging military spending hidden in other federal departments like Energy and Commerce. He failed.

Senator Paul believes he is trying to hold the Republican Party to its core principles, but that’s where he’s wrong. The party was born in the mid-19th century on a platform of raising taxes, increasing the size and scope of the federal government and, for the first few years, abolishing slavery. It has never really changed.

It’s time those Republican voters attracted by the GOP’s rhetoric of free markets, smaller government, and more personal liberty face the reality that Harding, Coolidge, Taft, and Rand Paul are the “RINOs.” The Republican Party and indeed, conservatism itself, is about big government, authoritarianism, and empire. Those looking to truly “drain the swamp” should consider placing their support elsewhere.