If the president’s tax plan is enacted, it will go down in history as the Trump Tax Cut of 2017. And it should, for both the tax reductions and the strategy for enacting them reflect his personal intervention and desires.
Trump considers himself an expert on taxes (especially on avoiding them). He also has a phobia about being linked to tax cuts for high earners, including himself. He fears Democrats will accuse him of seeking to enrich himself and the wealthiest of upper-class Americans. And that his tax initiative will fail.
This obsession has shaped the framework of his tax proposal. The top rate on individual income would dip from 39.5 percent to 35 percent, a far smaller reduction than in President Reagan’s two tax measures in the 1980s. And Trump would cut the corporate tax rate from 35 percent to 20 percent. This is the rate often associated with wage gains. When it goes down, workers benefit.
Just days before his tax plan was unveiled last week, the president was privately talking up a 15 percent corporate rate, which he advocated in last year’s campaign. And weeks ago he had considered the idea of Steve Bannon, his now-departed aide, to raise the top income tax rate to 44 percent. That would have sparked a Republican rebellion on Capitol Hill. So Trump took a pass.
Republican advisers told him Democrats would attack him as pro-rich no matter what he proposed. But Trump has a strategy in mind: He’s been daydreaming about a compromise with Democrats. Once that notion fades, as it surely will, he has a fallback position: secure the votes of three moderate Democratic senators facing tough reelections in 2018—Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota, and Joe Manchin of West Virginia.
If two or three endorse his bill, Trump would dub it bipartisan, which is a badge of popularity for the moment. Even if they shun it, Trump could claim credit for trying oh-so-hard to win them over, then go ahead and exploit the current popularity of bipartisanship anyway. Congressional Republicans would be relieved. They have never wanted a compromise in the first place.
Trump is personally wooing the three, having taken Donnelly and Heitkamp on board Air Force One when he traveled to their states to tout tax reform. In Indianapolis last week, he said, “if Donnelly doesn’t approve it . . . we will campaign against him like you wouldn’t believe.” Trump was smiling as he spoke.
In his speech, Trump invoked President John F. Kennedy for the first time as a model of a tax-cutting Democratic president. Kennedy “championed tax cuts that surged the economy.” He quoted JFK as saying, “The right kind of tax cut at the right time” is the best way “to spur our economy forward.” And “this is the right time,” Trump added.
His overall pitch—an appeal to an unhappy middle class—is not a novel one. But he added unexpected touches. He didn’t call for cutting the tax rate on capital gains or dividends, hardy perennials of GOP tax legislation. Nor did he rule out calling for a hike in the individual rate—possibly to 37 percent or 38 percent—when the House takes up the bill shortly. Bannon would approve.
In his basic argument, Trump insists the middle class will be the beneficiary of practically everything in the bill, including reforms of the tax code. “By eliminating tax breaks and loopholes, we will insure that the benefits are focused on the middle class . . . not the highest-income earners,” he said in Indianapolis.
Special interests and the well-connected “can call me all they want,” he said. “It’s not going to help. I’m doing the right thing, and it’s not good for me [financially]. Believe me.” And simplifying the tax code will make filing on a postcard easy, he said. “H&R Block will not be supporting Donald Trump, I can tell you.”
For what it’s worth, Trump is off to a good start on tax reform. He’s already played a bigger role than he did on health care. The question is whether he will be a political asset or a liability in getting the bill passed.
What’s required is what he’s never exhibited in the past: discipline, focus, reliability, coolness under fire, and political dexterity. These traits should sound familiar. They belonged to Reagan. And they were in play when he led the fight for sweeping tax cuts in 1981.
Reagan had a bigger task than Trump does today. He had to explain supply-side economics and why tax rates should be whittled down from the top. Even his allies were leery. Senate majority leader Howard Baker called the Reagan cuts “a riverboat gamble.” The elder George Bush described Reaganomics as “voodoo economics.” Though he changed his mind when Reagan made him vice president, I think he meant it the first time.
In a televised speech from the Oval Office on July 27, 1981, Reagan explained it all brilliantly. He used two charts. He didn’t shy away from details. He was in total command of the material and the political circumstances. A few days later, bipartisan tax cuts passed.
Trump’s task is smaller than Reagan’s in that he, politicians, and the public are up to speed on how tax cuts can, if skillfully implemented, generate private investment, economic growth, and job creation. (The media still don’t have a clue.) But Reagan had a tailwind. Trump doesn’t. He needs to create one.
Trump is capable of doing this, but not if he takes a week off to trade insults with the NFL or contradicts the details of his own proposal. He can’t afford to refer to it as “mean tax reform.” His speech last week was close to flawless and was reminiscent of Reagan’s great address to the nation.
Reagan urged voters to tell Washington of their support for his tax cuts. “Tell them you believe this is an unequaled opportunity to help return America to prosperity and make government again the servant of the people,” he said. And they did.
Trump’s windup was blunt but effective. “Call your congressmen,” he said. “Call your senators. . . . Let them know you’re waiting. Tell them today is the day for decision. . . . If you demand it, the politicians will listen. They will answer, and they will act.”
Reagan won the day with a single speech. Trump may need a speech a day on lower taxes and jobs. If he rises to the occasion, so will Congress.
Fred Barnes is an executive editor at THE WEEKLY STANDARD.
