Home / sciense / Why Republicans Might Be Forced To Oppose Tax Cuts

Why Republicans Might Be Forced To Oppose Tax Cuts

Jun. 30, 2017
5:59 AM

Why Republicans Might Be Forced To Oppose Tax Cuts

By Ben Casselman, Anna Maria Barry-Jester, Kathryn Casteel and Maggie Koerth-Baker

Filed under The Trump Administration

Welcome to TrumpBeat, FiveThirtyEight’s weekly feature on the latest policy developments in Washington and beyond. Want to get TrumpBeat in your inbox each week? Sign up for our newsletter. Comments, criticism or suggestions for future columns? Email us or drop a note in the comments.

As Senate Republicans look for a way to save their struggling health care bill, some of them are floating a once-unthinkable possibility: keeping some of the taxes imposed by the Affordable Care Act. It may not happen, but that it’s even on the table helps illustrate why broader tax reform is going to be so tricky for the GOP.

Democrats paid for their big expansion of the health care system via a series of new taxes on medical devices, health insurers and, especially, wealthy people. When Republicans came to power this year, they pledged to abolish most of those taxes as part of their plan to repeal and replace Obamacare. Both the bill that was passed by the House and the one that is now being considered by the Senate would cut taxes by billions of dollars.

But getting rid of the Obamacare taxes poses two big problems for Republicans. The first is political: The cuts would go overwhelmingly to the richest Americans. The Tax Policy Center, a think tank that leans to the left but whose analyses are generally respected by both sides, estimates that nearly 45 percent of the Senate bill’s tax cuts would go to the top 1 percent of households by earnings. One tax that the GOP wants to repeal, the “net investment income tax,” is even more skewed: 90 percent of its revenue comes from the top 1 percent, and 62 percent from the top 0.1 percent. That has made it easy for Democrats (including former President Barack Obama himself) to tar the Republican plan as a tax cut for the rich.

The tax cuts also create a math problem for Republicans: The more they give up in tax revenue, the more they have to cut spending on health care programs.1 That could make it harder to appease moderate Republicans who want more money to fight the opioid epidemic, smaller cuts to Medicaid and more generous subsidies for low-income Americans to buy insurance.

Now some Republican senators are suggesting that they keep at least the investment tax, which is expected to generate $172 billion in revenue over the next 10 years, according to the Congressional Budget Office. “It’s not an acceptable proposition to have a bill that increases the burden on lower-income citizens and lessens the burden on wealthy citizens,” Republican Sen. Bob Corker of Tennessee told reporters. Two other GOP senators, Susan Collins of Maine and Mike Rounds of South Dakota, have expressed similar concerns.

Some Senate conservatives are likely to oppose any effort to keep the investment tax, and, as with everything in health care right now, it’s unclear how things will shake out in the end. But whatever happens, the debate provides a preview of the coming fight over tax reform, which Republicans have vowed to tackle once the health care process wraps up. President Trump hasn’t yet released a detailed tax plan, but the outline he has provided suggests that the plan will, like the health care tax cuts so far, disproportionately benefit the rich and lead to big reductions in government revenue (making it harder to pay for spending on infrastructure, the military and Trump’s border wall, among other priorities).

The parallels aren’t perfect. It’s unlikely that any GOP tax reform proposal will favor the rich quite to the degree that repealing the Obamacare taxes would. And a stand-alone tax bill won’t have the same one-to-one tradeoff of revenue and spending as the health care overhaul. But broad tax reform is also more complicated than simply repealing the Obamacare taxes. There are dueling interests and competing priorities, even among Republicans, that could prove difficult to resolve. If Republicans are having trouble repealing taxes that they all agree they want to get rid of, it’s a safe bet that real tax reform isn’t going to be any easier.

Health care: Rural struggles

Beyond the question of tax cuts, much of the discussion of the Senate health care bill has focused on insurance coverage, in particular the 22 million additional people that the CBO estimates would go without health insurance under the plan. What has been less talked about is the impact the bill would have on the broader health system, particularly in rural areas.

Research suggests that the Republican approaches proposed in the House and Senate would have a large and negative impact on rural hospitals. An analysis from the Chartis Center for Rural Health released this week estimates that in states that expanded Medicaid under Obamacare,2 hospitals would lose more than $470,000 a year in revenue. In states that didn’t expand, the amount would be less, around $240,000. Those losses would largely be due to cuts to Medicaid included in the proposed Senate health care the bill, cuts that would total $772 billion. The bill includes additional payments to some rural hospitals, but it’s not nearly enough to offset the expected losses in insurance coverage, Chartis estimates. Those cuts would likely cause 140-1503 more rural hospitals around the country to operate at a loss. In all, 48 percent of rural hospitals could end up in the red, compared to 41 percent today.

Financial struggles have already led to nearly 80 hospital closings since 2010, and these closings can be a major hit to rural communities. Earlier this week we profiled Greene County, Alabama, home to one of the country’s struggling rural hospitals. With about 200 employees, the county health system is essentially tied with a box manufacturer as the largest employer in the county. “You close the hospital here and now you’re talking about jobs, and you’re never gonna get an industry because there won’t be a hospital in a 30-mile radius,” hospital CEO Elmore Patterson III said, adding that the closure would also mean the area would lose professionals who are a key part of the area’s tax base. Greene County isn’t an outlier; in many rural counties, the local hospital is among the biggest employers in the area.

The strain on hospitals also puts a strain on rural communities, which are already disproportionately burdened when it comes to health care. People in rural areas tend to be older and are more likely to be veterans, two high-needs groups when it comes to health care (and also two groups that supported Trump for president). Rural areas also experience higher rates of childhood poverty and higher rates of premature death. The rushed Senate process has made it hard to see beyond the basics of the bill, but its impact would be felt throughout the health system.

Immigration: The ban is back

The Supreme Court this week reinstated a limited version of Trump’s ban on travel from six predominantly Muslims countries: Libya, Sudan, Syria, Iran, Yemen and Somalia. The revived ban took effect on Thursday, nearly six months after Trump’s initial executive order. The court ruled that travelers can be barred entry if they don’t have a “credible claim of a bona fide relationship” with a person or entity in the country, but didn’t specify what qualified as bona fide relationship or who would be affected. According to guidelines issued by the State Department before the order became effective, a bona fide relationship with parents, children and in-laws in the U.S. is enough to gain entry, but not grandparents or cousins. (Late on Thursday, the State Department revised its guidelines to include fiancés.)

But even with the guidelines, which have already drawn a legal challenge, there remains significant uncertainty about how many people will be affected by the ban. Data on travel from past years can provide some guidance. In fiscal year 2016, the State Department issued over 81,000 total visas to people traveling from the six affected countries. Of those, more than 28,000 were immigrant visas, issued to people looking to move to the U.S. permanently. Most of those people wouldn’t have been affected by the Supreme Court’s version of the ban, according to the State Department — about 80 percent of them having a family or employment connection. But more than 5,000 of them were so-called diversity visas, which are given to people from countries with historically low rates of immigration to the U.S. and are issued through a lottery program. Some of those applicants would likely now be blocked by the travel ban.

The ban will likely have a much bigger impact on non-immigrants, people looking to travel to the U.S. temporarily. In fiscal year 2016, the State Department issued more than 53,000 non-immigrant visas for travelers from the six countries. Some of them were issued to students, travelers coming in through work exchange or government officials who aren’t likely to be affected by the order. But around three-quarters of them were visas for tourism, business or medical purposes.4 Applicants for those visas would only be allowed in if they could show they are visiting a close family member or have some other bona fide relationship.

These rules are only temporary. In October, the Supreme Court will review challenges to the travel ban, which could eventually pave the way for rules that are stricter (if the court upholds Trump’s ban) or more lenient (if the justices rule large parts of the ban unconstitutional). But in the meantime, immigration lawyers are bracing legal battles over the relationship guidelines.

Environmental regulation: The feds vs. the states

The Environmental Protection Agency is the most politically polarizing agency in the U.S. government. And for its mostly conservative discontents, the EPA has become synonymous with capital-“B” Big Government. But despite that reputation, state control is at the heart of how the EPA was designed. The federal agency sets standards to meet the congressional mandates in legislation, such as the Clean Water Act, but enforcement, monitoring and other practical details are largely left up to the states.5 As of February 2016, 96 percent of the powers that could be in the hands of the states were. A report published in June by the Environmental Council of the States, a nonpartisan association of state environmental agencies, described states as “the primary implementers” of environmental statutes.

But you wouldn’t know that from the speeches of EPA Administrator Scott Pruitt, who has focused heavily on a need to return control to the states — rhetoric that popped up again this week in a proposal to rescind an Obama-era regulatory rule. Together with the Army Corps of Engineers, the EPA is proposing to repeal the “Waters of the United States,” a 2015 rule meant to broaden the scope of the Clean Water Act by stretching it beyond navigable waterways to the streams, wetlands and seasonal creeks that feed them. The rule was never implemented because of legal challenges. Now, like the Clean Power Plan before it, it likely never will be.

Rhetoric about correcting federal overreach is a major part of the justification for current EPA efforts to cut budgets and eliminate regulations. But how do we make sense of a policy argument that seems contradictory to the power structure as it exists on paper? According to Alexandra Dunn, executive director of the Environmental Council of the States, the answer is tied to a fundamental disagreement about quality control.

The federal EPA retains veto authority over most of what states do in order to make sure that enforcement is carried out the same way everywhere. And while EPA officials defer to the states in general, the agency does step in if there’s a documented history of failure to make progress. The trouble, Dunn said, is that the states and the EPA don’t interpret that language the same way. States tend to think the EPA should step in only rarely; the feds have tended to be more aggressive. Dunn compared the states to people on an exercise regimen who aren’t losing weight. With all the sweat, they might feel like they’re working hard. But their trainer (the EPA) might look at the scale and feel like they aren’t. “It’s in the eye of the beholder,” she said. But the clash strains the limits of trust and, she believes, pushes some states to reject attempts to expand the scope of what they (and the EPA) would have to enforce. That’s why — despite high favorability ratings overall and general American support for its goals — the EPA is facing a major shift in priorities and funding. Pruitt has the perspective of the guy on the treadmill, not the one with the clipboard.


  1. In theory, Congress could cut taxes without reducing spending and just borrow money to pay for it. But that poses its own problems, both because some conservatives oppose deficit spending and because Senate rules make it harder to pass a bill that adds to the deficit.

  2. A Supreme Court decision left it up to states to decide whether or not to expand Medicaid to everyone earning under 138 percent of the federal poverty line. To date, 31 states and Washington, D.C., have chosen to do so while 19 have not exercised the option.

  3. Depending on which version of the bill was enacted.

  4. All these figures are for visas, not individuals. Some visitors might receive more than one visa in a year.

  5. When it was first created, the EPA itself carried out congressional mandates. States can apply to take on those powers and, over time, most have.

Ben Casselman is a senior editor and the chief economics writer for FiveThirtyEight. @bencasselman

Anna Maria Barry-Jester reports on public health, food and culture for FiveThirtyEight. @annabarryjester

Kathryn Casteel writes about economics and policy issues for FiveThirtyEight. @kathryncasteel

Maggie Koerth-Baker is a senior science writer for FiveThirtyEight. @maggiekb1

Filed under

Health Care (279 posts)
The Trump Administration (237)
TrumpBeat (22)
Tax Policy (7)

Thanks for subscribing!
A confirmation email is headed your way shortly. In the meantime, subscribe to FiveThirtyEight’s other newsletters.

Want more FiveThirtyEight? Get our weekly most popular stories newsletter.


All newsletters

Please enter a valid email address and try again.

Most Popular in Politics

2018 Election

Maybe Trump Didn’t Remake The Political Map

Most Popular in Sports


Paul George Makes The Thunder Contenders Again

Thanks for subscribing!
A confirmation email is headed your way shortly. In the meantime, subscribe to FiveThirtyEight’s other newsletters.

Want more FiveThirtyEight? Get our weekly most popular stories newsletter.


All newsletters

Please enter a valid email address and try again.


How The Internet* Talks

How The Internet* Talks

Most Popular in Politics

2018 Election

Maybe Trump Didn’t Remake The Political Map


About redox

Check Also

How Do We Know When A Hunk Of Rock Is Actually A Stone Tool?

The first time archaeologist John Shea looked at what might be the oldest stone tools ever found, he almost blew them off. “Are you kidding me?” he remembers asking Sonia Harmand, his colleague at Stony Brook University who found the tools in 2011 along the shores of Kenya’s Lake Turkana, at a site now known as Lomekwi 3. Harmand’s analysis suggested that the tools were 3.3 million years old — 700,000 years older than the previously known “oldest” tools. And they were huge. The mean weight of the pointy flakes — the cutting tools that are “flaked” off larger rock cores — was 2 pounds. In comparison, the next-largest group of ancient hominin tool flakes have a mean weight of 0.06 pounds. It seemed like a lot for the hands of a primate that was probably half the size of the average modern human. Maybe, this time, a rock was just a rock. But then Shea looked at the Lomekwi tools more closely, and he saw multiple fractures, all running in the same direction — a telltale sign that the flakes weren’t just the lucky product of one rock bumping into another as it tumbled off a cliff or rolled through a stream. Something had pounded one rock against another in the same place over and over and over … until a sharp piece broke off.The archaeologists who study lithic technologies — “stone tools” to us lay primates — are used to making these kinds of determinations. For generations they’ve been sorting out what is a tool, what isn’t, and what those tools mean, and they’ve been doing it largely by sight, by context of the objects and the site where they were found, and by experience. They learn the signs. They use dating techniques and look for evidence of how tools were being used. They test hypotheses by making their own stone tools and using them to see, for instance, how an ax might wear down after it’s hacked through a few deer femurs. “But here’s the problem,” Shea said. “Archaeologists don’t have measurements to answer these questions. The decision rests on visual assessment. I’ve made stone tools for 45 years, started as an 11-year-old Boy Scout. So is this an artifact or not? Truthfully, I have no idea. I can’t tell you based on measurements, and my opinion shouldn’t count for science.”Archaeological analysis always involves some amount of informed interpretation, and not all archaeologists are this skeptical of the traditional methodology. Harmand, for one, thinks that visual assessment is crucial. But only during the past decade or so has there been any real alternative. Called geometric morphometrics, it’s a suite of digital tools that can turn one of Lomekwi’s 4-inch-wide flakes of volcanic basalt into a 2-D or 3-D map of its curves, cracks, shape and size. These maps could be put into databases that could, eventually, allow scientists to compare the minute variations among tools from different periods and different locations. This technology is still in the early stages of adoption. Many tools have been scanned; far more have not. It’s primarily used to give archaeologists around the world access to artifacts they would otherwise have to travel long distances to see. People such as Shea hope that it will, one day, allow archaeologists to more definitively answer questions that today are addressed using circumstantial evidence and logical conjecture.The central issue is not necessarily whether scientists can tell a tool from a naturally broken rock. The more complex question is how to tell the difference between tools intentionally created (probably by humans or our ancient ancestors) and those that another primate made by accident. The difference matters. Once upon a time, we considered tool use the factor that separated animals and humans. As scientists discovered tool use among more and more animals — including chimpanzees and octopuses — the goal post shifted. Today, as far as anyone yet knows, humans and our ancestors are the only animals that create sharp-edged tools specifically for cutting things. Humans have taught captive bonobos to make stone cutting tools, but we have no evidence of any living primates intentionally doing this in the wild.But the line is awfully fuzzy. Especially when you’re looking at really ancient tools such as those at Lomekwi. Somebody somewhere had to invent stone tool making. And “probably the first tools ever made by a hominin were made by accident,” Harmand said. Imagine your less-upright ancestor going to town on a nut with a rock, trying to get at the good stuff inside. “Of course, you will sometimes hit the stone with your other stone and then detach something,” she said. And although hominins seem to be the only primate to think, “Hey, I’ll take that bit of stone and go butcher me a hog,” there’s evidence that other primates are still accidentally making “tools” — and that those tools are very difficult to distinguish from the ones archaeologists attribute to our predecessors.Last month, Oxford archaeologist Tomos Proffitt published a paper that documents wild capuchin monkeys in Brazil cheerfully screwing with a whole scientific field by intentionally picking up rocks and banging them against other rocks over and over and over in the same place … until sharp pieces broke off. There’s no evidence that the monkeys were trying to make tools, and they generally ignored the flakes. Their behavior could be an aggressive display or possibly a means of getting at lichens or trace minerals in quartz dust. Either way, the accidental “tools” they produce from intentional rock-banging are virtually indistinguishable from what you might find in 3-million-year-old East African soil. “If you brought this to me [and said it came from] East Africa, I would have told you, ‘You’ve got a new Oldowan. Where’d you find it?’” Harmand said. “I’m convinced many of my colleagues would confirm.”The context in which the tools or “tools” are found is really the only way to tell the difference. Where did they come from? How old are they? Were the sharp flakes being used for anything, like butchering, which often leaves cut marks on bones nearby?Geometric morphometrics could shed some light on this. For instance, what would Shea do about the capuchin monkey “tools” and their similarity to ancient hominin tools? “One of the claims is that these objects are indistinguishable from artifacts manufactured by humans. Well, let’s see. You could scan them, the ones we’ve watched be modified by capuchins. Then scan early human stone tools, and compare them. Do they differ in specific ways, and is that statistically significant?” he said. “We can argue about what it looks like, or we can measure it.”Proffitt, the scientist who wrote the capuchin paper, is one of the archaeologists who have used geometric morphometrics for research. One paper he worked on investigated whether different methods of making stone tools might leave different signatures in the rock. The freehand technique is similar to what the capuchin monkeys do: hold a rock in each hand and mash them together. In what’s called bipolar knapping, on the other hand, you put your stone tool core on a stationary anvil rock on the ground and then hit the core with another rock. That may not seem like a lot of difference, but, theoretically, bipolar knapping gives you more control. “It speaks to intelligence and cognitive processes going on,” Proffitt said. “If you have only freehand knapping for a million years, and then you have bipolar knapping, you [now] have more varied behavior.”The team digitized hundreds of flakes and examined their 2-D outlines — and found no statistically significant differences between the ones made with the freehand technique and those made with bipolar knapping. It’s possible that a 3-D model would show something more. But this paper highlights that you need more than just the tool — whether you’re eyeballing it or digitizing it — to know how it was made. That’s not a totally new conclusion, but it’s important, because it helps to clarify what morphometrics can and can’t do.Some of the most detailed work in morphometrics has been with younger North American tools. Here, the questions are less about whether something is a tool — with 12,000-year-old artifacts, their human-madeness is obvious — but, rather, what differences in the styles of tools can tell us about the people who made them.No two tools are identical, said Andy White, an archaeologist at the University of South Carolina. There wasn’t an Old Spear-Getting Factory churning out duplicate objects. But what we don’t know is how much of the difference between them can be accounted for by the vagaries of artisan work and how much represents real, cultural distinctions between groups of craftspeople. “You can take measurements in a computer that I can’t imagine how you’d ever take them with a pair of calipers. [You can] fit curves to things. Quantify things,” he said. “[I use] computer modeling and simulation to try and give myself some kind of credible avenue to interpretation.” White is compiling a database of projectile points, dating from 8,800 to 6,600 B.C., from across what is now the eastern United States.Ultimately, though, Shea thinks geometric morphometrics hasn’t really had its first major test yet. It won’t really become widely used or relied upon for interpretation until it answers some kind of flashpoint, high-stakes question in archaeology, he said. And that could be Lomekwi. Some are still skeptical of whether those are actual, intentional tools. If there were another site from around the same time with tools that were either more clearly hominin-made or more clearly monkey accident, then digitization might be able to reveal, for certain, where on that spectrum Lomekwi falls. “They have this one site,” Shea said. “Somebody needs to find something almost, or slightly, older, and they need to go at each other.”