Editorial | GOP bet on wrong horse


It’s pretty clear what happened on Nov. 6. Now analysts are digging deep intothe voting numbers and polling datato figure out why.

Democrats scored a series of big wins on Election Day, most notably winning back a majority of the U.S. House of Representatives.

The party out of power, by tradition, generally gains seats in off-year elections. But Democrats won in dramatic fashion, exceeding the usual margin by picking up roughly 40 seats.

There are a variety of reasons why that happened, including distaste for President Donald Trump by distinct segments of voters (suburban women) who voted for Democrats to punish Republicans.

The GOP anticipated the challenge. That’s why — both for policy and political reasons — congressional Republicans passed a major tax bill that lowered tax rates and reduced deductions.

Democrats denounced the measure as a “giveaway” to the rich. So it’s more than interesting to note that a tax increase on upper-income earners was one of the factors that cost Republicans at the ballot box in affluent congressional districts.

It may sound odd that a tax bill denounced by critics as a sop to the rich included tax increases on the rich. But as former Yankees manager Casey Stengel used to say, “You could look it up.”

One of the tenets of supply-side economics is that tax rates should be lower and deductions should be fewer. Further, to make up for losing revenues by lowering tax rates, the legislation needed to raise revenue by shrinking deductions.

As a consequence, the GOP limited annual itemized deductions for state and local taxes to $10,000, a move that will cost upper-income taxpayers who pay far more than that in state and local taxes.

The vast majority of taxpayers take the standard deduction, which was increased in the tax bill, rather than itemize.

But Republicans and Democrats in high-tax states like Illinois, New York and California complained about the limit on SALT deductions.

The New York Times reports that Democrats swept four GOP House seats in upper-income areas of California, where 40 percent of taxpayers take SALT deductions. A GOP legislator in a Virginia district where 50 percent-plus of taxpayers take the SALT deduction was swamped.

In suburban Chicago, two Republicans representing affluent areas lost their seats to Democratic challengers.

Two New Jersey Democrats already have indicated they’ll introduce legislation to restore the full SALT deduction. That would appear to be a mostly symbolic declaration because, as the Times noted, “they would be, in effect, reversing a tax increase on well-off Americans.”

One thing is clear about taxes — few people, whether rich or poor, like to pay them. Even fewer people — rich or poor — think their taxes are too low. So when they get hit in the wallet, they don’t appreciate it and take vengeance.

It remains unclear to what extent the reduced SALT deduction influenced voters to push Republicans at the ballot box. People vote one way or another for many reasons.

But if Republicans thought voters look favorably on their tax cut bill, they were mistaken. Obviously, it wasn’t good politics. The only consolation they can take now is the hope that it will prove to be a sound economic policy.

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November 26, 2018 at 07:16AM

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