Politics

Battle over tax hikes muddies the GOP's post-Trump push to be the party of the working class

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Key Points
  • The battle over President Biden's economic recovery plan may undermine the Republican Party's attempt to rebrand itself as the party of the working class.
  • Trump's presidency, the pandemic relief bills and recent GOP policy plans have all helped Republicans cement gains among working-class voters.
  • But Biden's plan to raise taxes to fund blue-collar jobs and family benefits is pushing Republicans back into the position of defending corporate tax cuts and opposing popular policies.
President Joe Biden speaks following a tour of Tidewater Community College in Norfolk, Virginia on May 3, 2021.
Mandel Ngan | AFP | Getty Images

WASHINGTON — The looming battle over tax hikes to fund President Joe Biden's economic recovery bills threatens to undermine the Republican Party's nascent, post-Trump effort to rebrand itself as the party of the working class.

Over the past decade, the share of Americans with only a high school education who identified as Republicans has risen by more than 10 points, from 34% to 45%, according to NBC News/Wall Street Journal polling.

Many of these voters were initially drawn to the GOP over cultural issues, not financial ones. But Trump injected economic populism into the party platform. In the 2020 election, despite losing the presidency, he won noncollege white men by 42 percentage points, and noncollege white women by 27 points.

Over the past year, Republicans also joined Democrats in voting for massive Covid relief bills that strengthened the social safety net with cash payments and enhanced unemployment benefits — two things that Republicans rarely vote for.

Since Biden took office in January, several GOP senators have released new policy plans that boost the incomes of working families, and that defy traditional, laissez-faire conservative economics. 

GOP Sens. Marco Rubio of Florida and Mike Lee of Utah proposed raising the child tax credit in Biden's coronavirus relief bill even higher than Democrats had initially set it. 

Sen. Mitt Romney of Utah has released a plan to provide a monthly cash benefit of $350 to families for each child under 6, and $250 a month for children 6-17 years old.

And Sen. Josh Hawley of Missouri, a staunch Trump supporter, announced legislation to give a tax credit to anyone making less than the mean hourly wage of $16.50, in the form of a quarterly check from the IRS.

Senator Josh Hawley, R-MO, speaks during a Senate Judiciary Committee hearing on the the January 6th insurrection, in the Hart Senate Office Building on Capitol Hill in Washington, DC, March 2, 2021.
Graeme Jennings | Pool | Reuters

"Before Trump, the GOP plan was to be hands off on the economy," said Henry Olsen, a senior fellow at the conservative Ethics and Public Policy Center. "But Trump's victories, and the fact that he mobilized large-scale support and grew the blue-collar vote for Republicans, changed all that."

In the House, Rep. Jim Banks of Indiana , leader of the conservative Republican Study Committee, wrote a memo last month arguing that the only way for the Republican Party to win control of Congress was by "enthusiastically rebranding and reorienting as the Party of the Working Class."

"For too long, the Republican Party fed into the narrative and the perception that the Republican Party was the party of big business or the party of Wall Street," wrote Banks.

All these initiatives reflect a party "trying to catch up with the people who are supporting them," said John Russo, co-editor of the publication Working-Class Perspectives and a visiting scholar at the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University. 

"Trump turned it upside down, especially when it comes to deficit spending. The GOP is trying to capture the voters he won over and keep them," he said.

But Biden's economic recovery package now threatens to drive a wedge between Republicans and the working-class voters they're trying to hold onto, by forcing the GOP to choose between protecting corporate tax cuts or creating more blue-collar jobs.

Russo noted that there are many ways to define "working class." For the purposes of this story, it means people without a college education.

The Biden factor

The Biden recovery plan is divided into two massive investment bills: the infrastructure-focused American Jobs Plan, and the American Families Plan, which expands education and child-care aid. 

The combined price tag for the plans is north of $4 trillion, but Biden intends to avoid ballooning the federal deficit in part by raising taxes on corporations and the very rich to pay for the programs. The chief beneficiaries of the plans will be Americans without a college degree and low-income workers.

For Republicans, however, the bills' prospects begin and end at the tax hikes.

U.S. Senate Majority Leader Mitch McConnell (R-KY) speaks at a news conference at the U.S. Capitol in Washington, U.S., December 15, 2020.
Nicholas Kamm | Reuters

Four years after passing the biggest tax cut in a generation in 2017, Senate Minority Leader Mitch McConnell said this week that any increase to the tax rates enshrined in the 2017 law would be a red line for Republicans.

Calling the cuts among the most significant domestic accomplishments of Trump's presidency, the Kentucky Republican said, "We're not going to revisit the 2017 tax bill."

He accused Democrats of wanting to "raise the corporate rate to the highest in the world," despite the fact that Biden proposes raising it only to 28%, which is still 7 points lower than the pre-2017 rate of 35%.

Banks and the Republican Study Committee were equally outraged by the proposed tax increases on the wealthy and corporations. 

"Biden and Congressional Democrats' assault on American jobs and American taxpayers is simply unconscionable," the committee said in a statement on the proposed tax hikes. 

But the 2017 tax cuts didn't win over many Americans, a reality reflected in a wide array of polls both during and after the bill's passage in late 2017. But that's not surprising, given that multiple analyses of the bill's impacts have found that the biggest beneficiaries of the changes, by far, were the wealthiest Americans and corporations.

Following the law's implementation, most voters did not report seeing any material change in their own circumstances.

By contrast, the first part of Biden's package, the American Jobs Plan, appeals directly to noncollege educated voters: Three of every 4 infrastructure jobs created by the plan will require no more than a high school diploma. 

Getty Images

Biden has referred to the jobs plan as "a blue-collar blueprint to build America," and it is widely seen as more likely to become law in a Congress where Democrats hold only razor-thin majorities in both chambers.

The second part of Biden's agenda, the American Families Plan, faces a narrower path to becoming law, and there are competing estimates of how much it would actually cost to greatly expand public education, child-care subsidies and unemployment benefits. Like the infrastructure bill, this, too, relies on making changes to the 2017 tax bill.

But not all Republicans agree with McConnell's iron-clad refusal to revisit the 2017 tax cuts.

An opportunity for the GOP 

According to Olsen, preserving tax cuts above all else reflects a kind of conservative economic thinking that's increasingly outdated.

"With respect, Senator McConnell tends not to be comfortable being a policy entrepreneur, so defending the tax cut comes naturally for him," Olsen said. "But going forward, it ought not to be the Republican approach to economic policy."

Instead, conservative economists like Olsen see the influx of noncollege educated voters to the GOP as a chance for the party to champion new kinds of economic policy that will appeal to working-class people because it genuinely benefits working-class people.

Sen. Mitt Romney (R-Utah) speaks as bipartisan members of the Senate and House gather to announce a framework for fresh coronavirus relief legislation at a news conference on Capitol Hill on Dec. 1, 2020.
Kevin Lemarque | Reuters

Oren Cass, executive director of the conservative economic policy group American Compass, sees "a huge opportunity here for conservatives to tell voters what they'd like to do, and not just reject Biden's plan."

Cass said the proposals introduced this spring by Republican senators like Romney and Hawley prove that there's fresh thinking inside the party about economic policies.

"If you look at these proposals, there's real interest in providing benefits to working-class families," he said.  

"Hopefully, the fight this summer won't be over whether to get more benefits to working families, because both parties will support that. It'll be about how to do it," said Cass.