by Neil H. Buchanan
Taxes are not supposed to be in the news right now. Back in December, Republicans
abandoned all pretense of legislative order and sensible lawmaking to pass their
stroke-the-rich tax bill, which Donald Trump happily signed. And now we are supposed to have moved on, which is pretty much what has happened. Why continue to worry about the last tragedy when new tragedies are hitting us in the face every day?
It is amusing to note, however, that Trump and the Republicans apparently think that their awful tax bill was a political
win for them, which means that they are the ones who want to keep talking about it.
In his inimitably narcissistic way, Trump even argued that the current government shutdown is all about the tax law. As The New York Times reported on January 18: "Traveling
in Pennsylvania, Mr. Trump accused Democrats of provoking a shutdown to
drown out discussion of the Republican tax overhaul. 'I think the
Democrats would like to see a shutdown in order to get off that
subject,' Mr. Trump told reporters before delivering a speech."
The words "detached from reality" seem especially apt here.
Given
how unpopular the tax bill was, and given that the bill is going to be
the Democrats' best non-Trump talking point in the upcoming elections,
the idea that Democrats would want to change the subject away from the
tax bill is absurd. Democrats should be spending every day hoping to
get people to remember just how bad this bill is, because the
Republicans handed them a huge political win with this reviled and regressive mess of a bill.
It
is true that companies have been trying to suck up to Trump by making
splashy pronouncements about how the corporate tax cuts are having
positive effects, even though the companies' moves are mostly either window dressing or entirely unconnected to
the new law and do not even fit
within the Republicans' theory of how the tax cuts are supposed to
work. Indeed, a spokesman for the U.S. Chamber of Commerce
(hardly a group that is hostile to Trump) admitted that such moves are "an extremely clever way to get the president’s attention [and]
probably gets them some good points inside the White House."
I realize that Trump can never be taken at his word, especially when
he is flailing about in an effort to gain political advantage. After
all, he is also claiming that Democrats planned the shutdown to distract
everyone from the gala celebrations of Trump's one-year anniversary as
president. Apparently, Democrats were willing to shut down the
government in pursuit of a two-fer, ruining Trump's happy tax talk and reducing his ego gratification, notwithstanding the political risk of
Republicans sliming Democrats for being too cozy with "illegals."
In
any case, Trump and the Republicans seem to have convinced themselves
that their extremely unpopular tax bill is somehow going to become popular. Stranger
things have happened, I guess.
In the meantime, people are trying to
figure out how to respond to the bill as it exists, and the leaders of blue states might have found a particularly satisfying way to frustrate Republicans' efforts to target citizens who tend to vote for Democrats.
One of the most nakedly
partisan provisions in the 2017 tax act was the reduction of the
deductibility of state and local taxes (SALT). Republicans in Congress
figured out that they could punish upper middle class voters in blue
states by putting a limit on the deduction for SALT, effectively
increasing the federal tax liabilities of educated professionals in states with
relatively high state taxes, all of which voted against Trump. Clever.
The
Republican response to any claim of unfairness is that people who do not
like to pay more in taxes can now put pressure on their state
legislators to reduce the state's tax take, which fits into Republicans'
theory of government -- or more accurately their theory of anti-government.
On
its face, then, this change in the federal tax code could simply be one of
many ways for the party that controls the government to pursue its
policy agenda. It gives people an incentive to do what Republicans want them to do. Playing hardball in politics is not necessarily unfair. (And this is hardly the
Republicans' only attempt to punish their perceived enemies, given that
the tax bill includes a tax on colleges and universities.)
As Michael Dorf pointed out in a column and a short note
last month, however, the Republicans' move was not merely an especially
shameless attempt to pursue their extreme agenda. By targeting those who
voted against them, Republicans actually violated the Constitution. He
concedes that this violation is unlikely to be struck down by the
courts, but as he put it, this "does not mean the [constitutional] objection is invalid;
it just means that there are institutional limits to where the claim can
be pursued."
As an interesting comparison, long-time readers
of my columns might recall the dark days of debt ceiling standoffs, when
Professor Dorf and I argued that if President Obama had ever failed to pay the
government's bills in full and on time, he would have violated the Constitution.
One of our most prominent antagonists at the time was Harvard Law School's Laurence
Tribe, who asserted that the debt ceiling supersedes the government's
spending obligations and thus that Obama would have had to stiff people who had valid legal claims to payments by the federal government.
Interestingly, Tribe offered a
throwaway line that at the time seemed uncontroversial. Yes, he
conceded, if Obama were to decide which bills not to pay using some
nefarious decision rule -- something crazy and unthinkable like, say, favoring
blue states over red states -- then he would be violating the
Constitution. But other than such a completely outlandish move as that
one, Tribe insisted that his analysis was better than ours.
There
is a very good chance that there will be another debt ceiling crisis later
this year, at which point I will revisit the relevant arguments that will again arise. For
now, however, my point is that Tribe's deliberately absurd hypothetical
was a near-perfect description of how Republicans have actually abused their
power. Amazingly, that constitutional violation is not even on the top-50 list of outrages that have been perpetrated by the Trump-Republican machine.
But
let us imagine that this actually is merely a tough version of standard
politics, with winners and losers feeling the consequences of
elections. Hardball politics can be played both ways, and it should be
no surprise that political leaders
in the affected states -- California, New York, Massachusetts, New
Jersey, and others -- have been trying to figure out ways to frustrate
congressional Republicans' political hit job.
Again, the SALT
provision in the new tax law is bad for upper-middle-income people in
blue states because such states have relatively high property taxes (due
in part to high home values in and around big cities) and
relatively high income taxes, all of which supports the kind of
redistributive safety net that Republicans love to hate.
When
the tax code is changed to eliminate or limit one deduction, however,
any sentient person is going to look for other provisions in the code that could allow them to deduct the same payments. Among several strategies, some of
these states are considering (or are already in the process of) setting
up "charities" to collect state taxes, because Republicans for obvious
reasons did not dare limit the deduction for charitable contributions.
For
anyone who thinks that this cannot possibly work, because the
charitable deduction has always been understood to be unavailable to
people who are using such contributions for personal gain (that is, not
truly being charitable), there is a bit of delicious irony. Religious
conservatives succeeded several years ago in gaining legal blessing to
deduct their "contributions" to religious schools, contributions that
are simply payments of tuition and are thus otherwise nondeductible.
If
the blue states go through with these efforts, therefore, there is a
very good chance that they will be able to misuse the charitable
contribution deduction because Republicans opened the door for such
abuse of the tax system. And although congressional Republicans could
revisit this issue and change the tax code to close such a loophole, it
seems unlikely that they could win an up-or-down vote on that provision
alone, because it would no longer be hidden by the other jaw-droppingly
bad provisions in the larger tax bill.
But is this a
good idea? Should liberals actually be trying to reduce the tax bills
of arguably comfortable people in the name of foiling conservatives'
attack on state governments? The answer is yes, as I will explain in a
follow-up column.