The (much more modest) Republican proposal to tax the richest university endowments is admittedly more of a targeted culture-war jab — but it’s also a good idea, notwithstanding the complaints from some conservatives that it’s a tax on academic excellence.
This complaint might be fair if there were clear evidence that enormous endowments were a sign of excellence, rather than a case of a cartel profiting on their entrenched position in an educational “marketplace” that never seems to feature any new competitors. But as long as the best-endowed universities are running billion-dollar tax-free hedge funds while facilitating privilege, elite conformity and self-segregation, a small tax is entirely reasonable; a larger one would be just.
So making the elite of blue America pay more into federal coffers is a fine and good and necessary thing; the problem is what the Republicans are doing with the money. Specifically (and entirely predictably), they are plowing way too much of it into tax cuts for their donors, and not enough into tax cuts for everybody else.
Yes, Kevin Hassett, the head of the Trump administration’s Council of Economic Advisers, has a model that attempts to justify this tilt, on the grounds that more of a corporate tax cut sluices through to workers than the professional-economist consensus suggests. But the underlying motivation for the tilt isn’t an intellectually rigorous devotion to Hassett’s model. Rather it’s donor service and the dead hand of Wall Street Journal editorial page dogma, which condemns tax favoritism toward workers or families as dangerous social engineering — as opposed to tax favoritism toward the investment income of Wall Street Journal readers, which is just the level playing field Almighty God intended.
But if Republicans could shake free of donorism and supply-side dogma for a moment, the path to a better bill should be quite obvious. All you need to do is scale back the corporate tax cut to something more reasonable (making the new rate 28 percent, let’s say, instead of 20 percent), limit the proposed tax deduction for pass-through businesses, and use the savings to make the child tax credit larger and reduce the bite that the home-mortgage and state-and-local-deduction changes take from the not-quite-affluent in blue states.
For Republican lawmakers who have criticized the outline on distributional grounds — including Senator Collins and child-tax-credit champion Marco Rubio — changes like these have seemed like a natural price to set for their support. They would rebalance the legislation, expand the ranks of beneficiaries, and hedge against the weaknesses of Hassett’s corporate-tax-cut theory with more direct help for wage earners.
Unfortunately, Senate Republicans seem to be turning to a more complicated and irresponsible alternative instead — one that gets more money for parents and middle-income taxpayers up front by making all their tax cuts sunset after 2025 (even as the corporate cuts are made permanent), while also claiming a highly-dubious few hundred billion in savings from repealing the Obamacare insurance mandate.
The sunset provision is budget flimflammery that sets up a vertiginous fiscal cliff; the mandate repeal probably requires an unlikely bank-shot deal with Democrats on stabilizing the Obamacare exchanges to be nondisastrous. And it tells you something depressing, if unsurprising, about the G.O.P. that this combination is apparently vastly preferable to asking the donors and ideologues to just accept half a corporate-tax-cut loaf.
But it still doesn’t have to be this way. At some point the party’s moderates and would-be reformers have to take a stand for the wild-and-crazy proposition that the Republican Party should pass legislation that has some chance of being popular and isn’t insanely jury-rigged. And with a Congress desperate to pass some kind of tax cut, a White House desperate to claim an achievement, and the midterms looming up, what better time to take that stand than now?
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