The Politics of Punishment
Steve Bannon Cheers as GOP Tax Plan Pours SALT in Wounds
The 28 Republicans in the high-tax blue states of California, New York, and New Jersey will face a moment of truth when the House votes again on the tax bill.
The Republican tax plan gores elites, the Eastern establishment, and blue states. That hurts a lot of Democrats, but there are plenty of long-serving “legacy” Republicans in high-tax states who will suffer too.
That’s what drew Trump consigliere Steve Bannon to the idea of ending SALT, the acronym for State and Local Taxes deductiblity. The move is triggering a major backlash among Republicans in high-tax states. For Bannon, who wants to blow up the establishment, that seems to be reason enough to to do it.
Bannon had wanted to raise the top tax rate to 42 or 44 percent, on the theory that the purveyors of progressive ideas in Silicon Valley, Wall Street, and Hollywood were getting a free ride. The New York Times reports that President Trump’s rich friends in New York are now complaining to him about the GOP’s tax plan and how it would hit their bottom lines.
The backlash could hit Republicans in high-tax states. Both the House and Senate bills end the federal deduction for SALT except for $10,000 in property taxes, a provision that would mostly take its toll on House Republicans in high-tax blue states. The non-partisan Cook Political Report just moved 12-term New Jersey Republican Rodney Frelinghuysen into the toss-up column because of SALT.
Frelinghuysen voted against the bill last month in its latest iteration, but “he won’t get any credit for it,” says David Wasserman, who tracks House races for the Cook Political Report. “Voters are going to be in a mood to send a message to Republicans, judging by public opinion on this tax bill.”
A Quinnipiac poll taken the week before the tax bill’s passage in the Senate found that only 29 percent of those polled liked the bill; 64 percent said it would benefit the wealthy the most.
The downturn in Frelinghuysen’s fortunes is emblematic of what Republican members will face in next year’s midterm elections. Frelinghuysen has never before had to worry about his electability. He chairs the powerful House Appropriations Committee. He’s won with solid margins for over 20 years in a district previously represented by his father.
But this time, he’s in trouble. He voted for the tax bill earlier in the process, which the Democrats will hang around his neck the way the Republicans did with Democrat John Kerry who said of a military funding bill while running for president in 2004, “I actually did vote for the $87 billion before I voted against it.”
Thirteen Republicans voted against the House tax bill when it passed last month, but that won’t give them a pass with voters. “Democrats will blame them, and voters are unlikely to distinguish between those that voted for the bill, and those that didn’t,” says Wasserman.
Nervous House and Senate negotiators charged with ironing out the differences between the House and Senate bills are grasping at ways to soften the blow for voters in high-tax states who have come to rely on SALT to lessen their federal tax liability.
The 28 Republicans who represent congressional districts in the high-tax blue states of California, New York, and New Jersey will face a moment of truth when the House votes again on the tax bill once it is reconciled with what the Senate passed. A dozen of the 13 members who voted against the bill last month are from this trio of high-tax states.
The bill passed with a comfortable margin of 227 votes, but 10 more defectors and we could see what Brookings scholar William Galston calls a “Marjorie Margolies Mezvinsky moment.” Mezvinsky was a Democrat representing a swing district in the Philadelphia suburbs, and she switched her vote from no to yes to become the deciding vote on President Clinton’s economic plan in 1993, which raised taxes on the top two income brackets.
Clinton desperately needed her vote, and she acquiesced, not wanting to hand the new president a major defeat. As she walked down the aisle to cast her vote, Republicans chanted, “Bye, Bye Marjorie,” and “Ding-Dong, The Witch is Dead.” She was one of 54 Democrats defeated in 1994 in what was termed the Republican Revolution.
Republicans today are making their own Faustian bargain. Party leaders believe they can coerce most of their members in blue states to vote for the bill on final passage, and that the GOP’s big donors will pony up the money to protect vulnerable Republicans, and help them win re-election. Eleven of the 24 seats Democrats need to win control of the House are in the three states most affected by SALT.
For a party that claims to oppose double taxation, the GOP’s vendetta against SALT is as hypocritical as its newfound toleration for deficit spending and its phony claim to populism. Eighteen percent of the population live in these three states that did not support Trump, and they claim 39 percent of the SALT deductions.
This is the politics of punishment.