A GOP Tax-Reform Proposal That Would Help the Working Class, Not the Donor Class

Republicans are ignoring the needs of the constituents who helped elect them—and giving preference to those who are already flourishing.

President Trump holds sample tax forms as he promotes a newly unveiled Republican tax plan with House Republican leaders on November 2, 2017.  (Carlos Barria / Reuters)

The white working class played a key role in Donald Trump’s election and in the election of Republican majorities to the House and Senate, and yet has been all but ignored in the on-going tax-reform debate. With the House bill already passed, and a vote on the Senate bill just around the corner, the window for their voice to be heard is quickly closing.

In 2016, support for Trump surged among whites without college degrees—a constituency that also made up a disproportionate share of the vote for House and Senate Republicans. For many of these voters, their support for Trump was, and continues to be, driven by concerns about the fragility of family life in America. Trump voters, in particular, have registered serious concerns about the number of children being raised in single-parent families and the difficulty of living paycheck to paycheck.

These concerns stem in part from what working-class whites are seeing playing out in their communities. The predominantly working-class counties that went from Obama in 2012 to Trump in 2016 had higher rates of family instability than did the counties that usually trend Republican, due in no small part to economic dislocations associated with the new economy, including increased trade with China and Mexico.

This economy has been particularly disastrous for men with less than a four-year college education, a group whose real wages declined between 5 and 25 percent between 1979 and 2010, according to economists David Autor and Melanie Wasserman, even as spells of unemployment have increased. This matters because men are less likely to get and stay married when they are not stably employed in a decent-paying job.

As a result, fewer than half of white working-class adults aged 25 to 60 are living in a first marriage, compared to more than 50 percent of college-educated whites. Only about one in two 14-year-olds in white working-class families are living in an intact, two-parent home, compared to approximately 80 percent of 14-year-olds in white, college-educated homes. These family trends are paralleled by economic trends: Today, the median family income where the household head has a high school degree is $54,600, compared to $114,640 where the head has at least a college degree. As Wilcox noted in When Marriage Disappears, the United States is in danger of “devolving into a separate-and-unequal family regime, where the highly educated and the affluent enjoy strong and stable households and everyone else is consigned to increasingly unstable, unhappy, and unworkable ones.”

It’s a cruel irony, then, that as the most important tax legislation in a generation winds its way through the halls of Congress, the priority has been given to the interests of donor-class families that are clearly flourishing, both financially and in terms of family stability.

To take just one example, the Child Tax Credit—long recognized as a tool for promoting stable families—is finally being increased after losing a quarter of its value to inflation since 2003. Yet instead of better targeting it to struggling working-class households, where an extra thousand dollars per child has been shown to reduce household conflict and improve child and parental mental health, the Senate bill expands the credit dramatically for rich households that were never close to being eligible in the past, including those making as much as $500,000 a year.

Republican leaders in Congress will say that there’s simply no room in the budget to do more for working-class families, most of whom earn too little to owe federal taxes in the first place. But these same families lose roughly 15 cents of every hard-earned dollar to federal payroll taxes, directly diminishing their incentive to work and their ability to put their families on a firmer financial footing. Indeed, as pundits ferociously debate the incidence of the corporate tax on workers (“Is it 70 percent, 20 percent, or something in between?”), virtually no one disputes that workers bear the full burden of payroll taxes. So why are such taxes left out of the conversation?

The truth is that there are ample resources to cut taxes for working families. Congress could, for instance, extend the $2,000 Child Tax Credit to payroll-tax liability, as Senators Marco Rubio and Mike Lee have proposed. This would put markedly more money in the pockets of working-class families who play by the rules and are struggling to realize the American Dream. Moreover, an expanded child tax credit could easily be paid for by cutting the corporate tax rate a mere percentage point or so less than the 15-point corporate-rate cut now being proposed by the Senate. In other words, if we cut corporate taxes to 22 percent, not 20 percent, we could ensure a full payroll-tax refund on the first $26,000 in earnings for a family with two children.

To do so will require Republicans to stand up to their wealthy, corporate donors. But in return, the Republican Party would finally give substance to its Trump-era aspiration to be a party of workers, while making a necessary step toward addressing the social and economic crisis facing American families today.