Wealthy Republican donors in the Northeast are closing their wallets, livid with the party for supporting a federal tax overhaul that penalizes their lifestyle and, in their view, abandons core tenets of conservative fiscal policy.
In gruff phone calls and angry emails, loyal GOP financiers have declined invitations to fundraisers and refused meetings with prominent Republican officials. The rejection has been especially acute in New York, a liberal bastion, but a major source of the party’s campaign cash.
“I think checkbooks stay closed until they see how it plays out,” said Eric R. Levine, a Manhattan attorney and Republican donor who bundled contributions for Sen. Marco Rubio, R-Fla., in 2016. “I’m not even trying to raise money in the fourth quarter.”
During former President Barack Obama’s tenure, GOP donors pumped millions into the party to help Republicans win control of Congress and the White House on the promise that they would enact reform that cuts taxes across the board and treats all industries equally, ending Washington’s practice of picking winners and losers.
Upscale Republicans, donors and voters in high-tax blue states like New York, fear that’s not what they’re getting under the House-passed overhaul or legislation moving through the Senate, both with the support of President Trump.
They foresee higher personal taxes under a plan that axes deductions for state and local taxes without offering what they consider compensatory reductions in marginal income rates, even with the repeal of the Alternative Minimum Tax that hits many upper-middle-class Americans. They resent that the bill excludes their white-collar service professions — think law, finance, and consulting — from the bill’s lower small-business rate, even as it shrinks the corporate levy to 20 percent from 35 percent.
The unfolding package is a disappointing development for many donors and voters, who are socially moderate to progressive and affiliate with the Republicans primarily because of the party’s conservative approach to economics and foreign policy. Republican pushback, that they should blame any tax hike on their liberal state and local governments, is falling flat.
“I’ve heard from a lot of different kinds of people with their feedback,” said Rep. Lee Zeldin, R-N.Y., who represents a prosperous suburban district on Long Island, many of whose residents work in New York City. “They’re running the numbers and realizing that their taxes are going to go up.”
Zeldin voted against the bill and remains opposed to it in current form, as do other blue-state Republicans. Rep. Tom MacArthur, R-N.J., among the few Northeastern Republicans to support the package, has fielded similar questions from constituents, donors, and voters about the impact of the bill.
“I find when I walk people through it, some of them settle down, some of them don’t, and I think it boils down to who they trust,” MacArthur said. “If they trust the Left for their news, they don’t like the bill. If they trust the Right for their news, they’re willing to give it the benefit of the doubt.”
Republicans are in a tough spot, politically. Several weeks ago, their donors were threatening to close the spigot, if they did not pass tax reform by year’s end. They were angry about the collapse of legislation to repeal and replace Obamacare and lack of other accomplishments.
Now, the party is on the cusp of the nation's first tax overhaul since 1986 and fulfilling a key 2016 campaign promise, and many of the deep-pocketed New York donors they need to help them protect their majorities in 2018 are protesting. Meanwhile, rank-and-file voters don’t like the Tax Cuts and Jobs Act, either.
Ironically, many voters appear inclined to agree with the Democrats that the bill was made to order for the GOP’s deep-pocketed contributors, at the expense of the middle class, despite the fact that Republicans wrote the plan to avoid such charges, at risk of alienating some of their staunchest supporters such as upper-middle-class voters who live in tony suburbs.
Just 36 percent of registered voters backed the legislation in a recent Politico/Morning Consult tracking poll. House Speaker Paul Ryan, R-Wis., said Thursday that public opinion will improve after the package is enacted and the economy takes off, creating jobs and lifting wages.
“You know what turns it around? Economic growth, jobs, more take-home pay, bigger paychecks, a more confident economy, companies bringing money into America from overseas,” Ryan said. “Results are what matter. We’re in the results business here.”
In interviews, Republican donors praised provisions of the tax overhaul that would impact corporations. They see merit in reducing the corporate tax rate and believe elements to encourage firms to transfer their overseas cash to U.S. banks and invest domestically could pay dividends.
Though that is not enough for many to look past what they believe are the plan’s severe flaws, some veteran GOP contributors concede that if it delivers the robust economic growth that Trump and GOP leaders predict, their views of the plan could change, loosening purse strings in time for the midterm.
"These individuals are pragmatists," said a Republican operative who interacts with the donor community. "They recognize that this plan benefits the vast majority of middle-class Americans and it's the right thing to do."