The Republican Party Is No Longer the Party of Tax Cuts

We’re going to raise about $100 billion with the auto tariff alone. What we’re going to do is in the new tax bill that has to pass—it absolutely has to pass—we’re going to provide tax benefits, tax credits to the people who buy American cars. This is a genius thing that President Trump promised on the campaign trail. So that’s going to happen. In addition, the other tariffs are going to raise about $600 billion a year, about $6 trillion over a 10-year period, and we’re going to have tax cuts. It’s the biggest tax cut in American history for the middle class, for the blue-collar deplorables … If you look at this basically holistically, as they say, consumers and Americans are going to be better off. 

Navarro’s rambling summation makes tariffs sound like tax cuts when they are tax hikes on importers passed down to consumers. But a closer read shows he claims that the cost of Trump’s tariffs on the consumer will be offset by separate tax cut legislation. However, when Navarro says that the legislation “absolutely has to pass,” that means that the legislation has not yet passed. Of course, plenty of so-called must-pass bills end up not passing. Even if something does pass, we don’t know what will be in it (including Navarro’s proposed domestic car purchase tax credit). So, what Trump will be doing on April 2 is issuing an import tax by fiat without securing any tax cut offset. 

House and Senate Republicans plan to enact tax cuts on a party-line vote using the budget reconciliation process to circumvent the Senate’s filibuster rule. And, in fairness to Navarro, they stand a good chance of succeeding. But the two chambers remain far apart on the bill, including the scope of tax cuts.  

Let’s look at this “holistically,” as Navarro urges. The House’s version of the budget resolution—a budget resolution is a nonbinding precursor to a budget reconciliation bill—envisions $4.5 trillion in tax cuts over 10 years. If new tariffs take $6 trillion in tax revenue, that is not fully offset by $4.5 trillion in tax cuts. 

But wait, there’s less!  

House Republicans do not envision $4.5 trillion in new tax cuts over 10 years. Most of that amount, $3.6 trillion, covers the cost of extending existing tax provisions enacted by Trump in 2017 and due to expire this year. That leaves only $900 billion, or $90 billion per year, in new tax cuts—not nearly enough to cover the $6 trillion cost, or $600 billion per year, of higher prices on imported goods. 

All these numbers are theoretical. Navarro is making firm revenue projections even though Trump is reportedly still undecided on the precise nature of the tariffs, which will ostensibly liberate us. Senate Republicans aren’t sold yet on the House Republican tax plan. They are waiting for the Senate parliamentarian to rule whether they can use an accounting gimmick to cloak the unbudgeted future costs of extending the provisions of the 2017 tax cut bill and lessen the need for offsetting spending cuts (particularly in Medicaid); then they will decide how big a tax cut package they embrace.  

Without specifics, we can’t assess how the burdens of tariff hikes and the benefits of tax cuts will be distributed. Inherently regressive tariffs are sure to hit the working class and poor the hardest. And while Navarro claims the tax cut package will be geared toward giving relief to “blue-collar deplorables,” Trump’s 2017 tax cut program was deplorably skewed to the wealthy.  

Much about the Republican Party changed between Ronald Reagan and the first Trump presidencies. Still, the one consistent tenet was belief in the power of tax cuts, economically and politically. Before Reagan, the ideologically flexible Richard Nixon signed the Alternative Minimum Tax into law, designed to clamp down on tax avoidance strategies by the wealthy. When Reagan slashed income tax rates twice, he drew new partisan fault lines that shaped our politics for the next four decades.  

While George H.W. Bush broke his 1988 “no new taxes” campaign pledge to cut a bipartisan deficit reduction deal, he renounced the agreement in his ill-fated re-election campaign. (“Who do you trust in this election? The candidate who’s raised taxes one time and regrets it, or the other candidate who raised taxes and fees 128 times and enjoyed it every time?”) The following two Republican presidents, Bush’s son, George W., and Trump, had vastly different views regarding foreign policy and immigration, but each used reconciliation to ram through massive tax cuts.  

In his second Oval Office term, Trump has made higher taxes on imported goods his highest priority, literally equating them with freedom. Trump ally Steve Bannon has even suggested Liberation Day should be a federal holiday. Putting those tax increases in place as soon as possible is more important to Trump and more critical to today’s Republican Party than any other tax cut.  

Thus, after 45 years, we say farewell to the Republican Party as the tax-cut party. Before Trump’s second term, voters could be reasonably confident that during a Republican president’s term, their income taxes would be cut. Sure, it would likely be bigger for the wealthiest Americans, but if you earned enough to pay federal income taxes, you could expect some income tax cut. That Republican Party is officially over. 

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