The tax bill is a tax cut, not a culture war

Today I want to push back a little on a meme I see getting traction that holds that the GOP tax reform bill is basically a great big “fuck you” from red America to the blue states. Sahil Kapur of Bloomberg calls it “Death to Democrats.”

There’s kind of a convergence of interests here whereby Democrats like this narrative because they want to emotionally invest their base in the fight; Republicans like this narrative because “we’re owning the libs” sounds a lot better than “we’re rewarding our donors”; and journalists like this narrative because it’s clever and makes you sound smart but also works as a kind of value-neutral, goo-goo critique of the bill rather than trenchant class war (see, for example, Chuck Todd’s thoughts — “this is not how you govern”).

But here’s the basic reality: Republican voters are richer than Democratic voters (though this was less true in 2016 than it’s historically been), but blue states are richer than red states. Consequently, any program that raises taxes on the rich to fund programs for the poor enacts a net transfer of economic resources away from blue states and toward red ones. Conversely, an initiative that cuts taxes on the rich and makes the poor pay the freight enacts a net transfer of economic resources away from red states and toward blue ones.

So it’s true that within the parameters of enacting a giant corporate tax cut, there are a lot of provisions to this bill that could be characterized as owning the libs. But fundamentally, it’s a giant corporate tax cut. And that matters.

A lot of attention has been paid, for example, to the fact that the GOP plan to curb the state and local tax (SALT) deduction is bad for California, which it is. But the single biggest winner from a large corporate tax cut would be Apple, which is based in … California. Most of the other big tech companies (though not Amazon, whose profits are low) also stand to gain a ton from a corporate tax cut, especially from the moves away from a worldwide tax system.

“Wall Street got almost everything it wanted in tax package,” according to the Washington Post’s Tory Newmyer, and that’s also my understanding of bank executives’ feelings about the bill. Wall Street is, of course, located in New York, with some offshoots in New Jersey, Connecticut, and Massachusetts.

The tax on large university endowments is one of the clearest culture war provisions in the bill. And obviously, all else being equal, Harvard and Yale would rather not see…

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