The Republican Tax Bill Screws the Working Class

Yahoo

14-05-2025

Donald Trump received 56 percent of the working class vote in 2024, according to exit polls, up from 51 percent in 2020 and 49 percent in 2016. The bond between the president and these voters is sadomasochistic. The more Trump skews government policy against the working class (defined here conventionally as people who lack a college degree), the more votes Trump receives from it. Honoring this special relationship, the House Republicans' latest tax plan (text; section-by-section summary) is the budgetary equivalent of a cat o' nine tails. Time for a safeword. I propose 'bullshit.'
The most notable thing about the House plan is that it doesn't include the very modest tax increase on income above $2.5 million, from 37 percent to 39.6 percent, that's recently been bandied about. Trump has danced around the idea of a millionaire tax, first telling Time's Eric Cortellessa that 'I actually love the concept but I don't want it to be used against me politically,' then saying 'It would be very disruptive, because a lot of the millionaires would leave the country' (no they wouldn't, but never mind), then finally saying 'Republicans should probably not do it, but I'm OK if they do!!!' The through line is I want everyone to think I'm for higher taxes on the rich but for the love of God don't do it.
Far from increasing taxes on the rich, the House bill cuts them by extending Trump's 2017 income-tax cut, which reduced the top marginal rate from 40 percent to 37 percent on income above $731,201 for married couples filing jointly and above $609,351 for single taxpayers. According to the nonprofit Institute on Taxation and Economic Policy, 65 percent of the cuts go to the top 20 percent in the income distribution (i.e., households that earn more than $153,000) and 28 percent go to the top one percent (households that earn more than $787,712).
Even more skewed, ITEP found, was a provision in the 2017 bill that gave a 20 percent deduction on 'pass through' income; that is, income from a small business. Small businesses tend to receive favorable tax treatment because of what former TNR editor Michael Kinsley has called an anthropomorphic fallacy that small businesses are 'owned by small people.' In fact, 92 percent of this benefit goes to the top 20 percent in the income distribution and 55 percent (i.e., most of it) goes to the top one percent. Half of the benefit goes to millionaires.
During the 2024 campaign, Trump promised working-class voters that he'd eliminate taxes on tips and on overtime, and the House bill includes these proposals. I argued then that these were trivial changes intended to distract from Trump's lousy regulatory record on tips and overtime. In the case of tips, Trump wouldn't support eliminating the $2.13 hourly subminimum wage for tipped employees and instead giving them a $7.25 hourly minimum like everyone else. The $7.25 minimum is of course scandalously low—and Trump did nothing about that in his first term. In the case of overtime, Trump extended eligibility in his first term to about one million workers; Biden set that regulation aside and expanded overtime to four million workers. Biden's rule was blocked after the election by two reactionary federal judges in Texas. The Trump Labor department filed an appeal, but only as a placeholder while Labor Secretary Lori Chavez-DeRemer finds out how much overtime coverage the White House will stomach. In the meantime, the appeals court has issued a 120-day stay.
I noted last summer that exempting tips from taxable income would have little effect because tipped workers don't pay much income tax in the first place. Thirty-seven percent of them earned sufficiently low incomes that they paid no income tax at all. The Joint Committee on Taxation confirms this by estimating that the lost revenue would only be about $40 billion over the next decade. Partly that's because the tax break would expire after four years, when you-know-who will be out of office. But it's also because tipped workers seldom earn enough income to pay very much in taxes. As expected, the tax holiday does not apply to the overwhelmingly regressive payroll tax that all workers pay. To most people, the income tax is virtually indistinguishable from the payroll tax; you typically have to earn about $200,000 to pay more in income tax than in FICA tax. Under the House plan, an existing FICA tax credit for tips would be extended for the first time to beauty parlors—but that tax credit is for employers, not employees.
Exempting overtime pay from taxable income is much more expensive than doing so for tips. It will cost $124 billion over the next decade, according to the Joint Committee on Taxation. As with the tax holiday for tips, this one will be short-lived, expiring after four years, and workers will still have to pay FICA tax on their overtime pay. Also, you don't get the income-tax exemption if you earn more than $80,000, which happens to be below the household median.
Trump also promised to exclude Social Security benefits from taxation, even though the median net worth for people aged 65 to 74 is more than twice that for the general population. People aged 70 and over own about one-third of the nation's total wealth—and Baby Boomers like me, the youngest of whom are 51, own 52 percent. Hurray!
So why did Trump promise us a tax break? Because America is a gerontocracy—dominated by older politicians, yes, but also by older voters. Not dominated enough, alas, for my age cohort to have denied Trump the White House; a little-noted fact about the 2024 election was that the Republican candidate for president failed to win the over-65 vote for the first time in a generation.
Trump's Social Security tax holiday was too expensive for the House to consider, so instead it expanded by $4000 an existing over-65 tax deduction of $29,200 for married couples filing jointly and $14,600 for single people. None of which we over-65s particularly deserve. But the expansion is only for four years and it's unavailable to couples earning $150,000 or more and single seniors earning $75,000. That keeps its cost down to $72 billion.
In sum: If you're working class, this tax bill has very little for you and quite a lot for people much richer than you. Think of it as a studded collar for your next visit to the dungeon, you naughty things. But I recommend, instead, that you recite your safe word, because, really, haven't you had enough of this bullshit?