Republican congressional leaders and President Trump are touting their joint tax plan as a major simplification of the tax code that will spur economic growth. But the plan also could end up serving another purpose: revenge on Never Trumpers.
Never Trumpers are traditional Republican voters who refused to vote for President Trump in last year's general election, preferring instead to stay home, vote for third party candidates, or in some cases, even back Hillary Clinton. They tended to be voters with college educations and relatively higher incomes -- though not necessarily wealthy. It happens to be this group that could have the most to lose from the current Republican tax plan.
Though Republicans have yet to release key details about the tax plan, the general framework that has been released has raised fears of tax hikes for middle-class families, especially those on the higher end of the middle-class income spectrum.
Broadly speaking, on the individual side, the legislation would collapse the current seven tax brackets into three rates; nearly double the standard deduction; eliminate personal exemptions; and increase the current per child tax credit by an unspecified amount.
Though there are a number of ramifications for these changes that cut in both directions, the plan creates a potential for tax hikes. Take a married couple filing jointly with two kids. Under the current system, they would receive four exemptions worth $4,050 each, for a total of $16,200. They'd be able to take that on top of the $12,700 standard deduction, for a total of $28,900 in reduced taxable income. Under the Republican plan, that same family would only receive the standard deduction, which, though higher, only gets them to $24,000. Thus, nearly $5,000 more would be exposed to taxation. Among those who itemize their deductions in the current system, the increased tax exposure would likely be even greater, as the new plan eliminates all deductions but the ones on mortgage interest and charitable donations.
The tax plan's proposed remedy for this (an enhanced child care tax credit) isn't available to families above a certain income threshold. Under current law, the credit begins to phase out on household income of $110,000, and by $150,000, a family of four would not be able to claim any credit. This could be a dual-income household with both spouses earning around $75,000 per year in taxable income.
Republicans still haven't specified the value of the new child tax credit, or where the income cutoff would be for those seeking to claim it. Nor have they determined the income level at which various tax brackets will kick in. So, it's possible that broader availabily of the child tax credit and lower rates on taxable income may compensate for the increased amount of income that's subject to taxation. But it's also possible that many families could find themselves in a no man's land under this plan -- subject to more taxes, earning too much to qualify for the child tax credit, but not earning enough to qualify for some of the tax relief that will benefit wealthy Americans.
Traditionally, this group of upper middle-income families were a core part of the Republican constituency, making up voters, activists, and small donors. But when Trump became the Republican nominee, there was a noticeable shift.
In 2012, voters from households earning between $100,000 and $199,999 went for Mitt Romney by 10 points (54 percent to 44 percent), according to exit polls. In 2016, they went for Trump by just 1 point (48 percent to 47 percent). Romney won those earning between $200,000 and $249,999 by five points (52 percent to 47 percent), whereas Trump actually lost among this income group (earning 47 percent to Clinton's 49 percent). In other words, it's within this group that you'd be most likely to find Never Trumpers.
During the Obama administration, Republicans fought tooth and nail against the suggestion that households earning $250,000 should be considered "rich" and subject to higher taxes. Yet their new plan could raise taxes on families with incomes much less than that amount.
To be sure, this isn't to say that the authors of the framework in the White House and Congress were seeking revenge on a particular voting bloc. And as mentioned earlier, it's perfectly possible that as Republicans fill in the remaining details, the final version will be less likely to result in massive tax increases for higher income middle-class Americans. But if these potential tax hikes are not addressed in future versions of the plan, this tax proposal could represent another major step in Trump's remaking of the Republican party.