“Iam a gay woman who is moderately pro-choice – I know that there are some people in this room who don’t believe that my marriage should have been legal,” the rightwing impresario Bari Weisstolda Federalist Society gathering in 2023. “And that’s OK. Because we’re all Americans who want lower taxes.”
The assembled conservatives guffawed at hearing the quiet part out loud: in this case, the admission that tax cuts for the rich have been the glue holding the US conservative movement together.
And yet, less than two years after Weiss’s speech, the epoxy seems to be less sticky.
In recent weeks, polls have shown Republican voters becoming far more skeptical of across-the-board tax reduction proposals. Reflecting that shift, GOP lawmakers are now trial-ballooning a proposal to increase some taxes on the wealthy. Some Maga voices are attempting to articulate a Republican-leaning, tax-cut version of Democrats’ traditional redistributionist rhetoric, arguing that higher taxes on millionaires should finance bigger tax cuts for the working class.
All of this has the Washington swamp’s old-guard Republicans in a panic; one longtime anti-tax leaderinsistedthat “there are traitors inside the Trump White House,” and anotherdeclared: “This is a potential crisis in the party – it sounds like Bernie Sanders economics.”
So what happened? Why is the anti-tax argument losing its unifying power amongRepublicans?
As the Lever’s new investigative audio seriesTax Revoltdetails, the answer may lie in that movement’s key revelation a half-century ago.
In the mid-1970s, the Republican party was adrift, demoralized and divided amid both the post-Watergate backlash and the Republican president Gerald Ford’sattempt to raise taxesin pursuit of halting inflation and plugging federal budget holes. A young journalist named Jude Wanniski had an epiphany when at a lunch meeting, he watched the economist Arthur Laffer draw a curve on anapkinto argue to the Ford staffers Dick Cheney and Don Rumsfeld that cutting taxes could raise companies’ revenues.
Two years later, Wanniski penned agrand unifying“Santa Claus Theory”, arguing that Republicans had “continued to play Scrooge, carping against increased spending without ever offering the obvious alternative”: tax reduction.
He concluded: “Republicans, traditionally the party of income growth, should be the Santa Claus of tax reduction,” offering it as a supposed gift to Americans – and understand that “the first rule of successful politics is Never Shoot Santa Claus.”
It was a revelation for a new generation of conservatives seeking to create a sunnier, more optimistic image for the GOP in the wake of Barry Goldwater’s cranky campaign and Richard Nixon’s downfall. Younger, more telegenic Republican leaders such as Representative Jack Kemp passed the essay around to colleagues, urging them to reimagine tax cuts not solely as a means to demonize government, but also as a way to court the working class with promises of life-bettering benefits.
The dual message of so-called “supply-side economics” soon found its Santa Claus in the anti-tax governor turned anti-tax presidentRonald Reagan.
“As government’s hunger for ever more revenues expanded, families saw taxes cut deeper and deeper into their paychecks,” Reagansaidbefore signing federal legislation to cut the top marginal tax rate. “This tax bill is less a reform than a revolution. Millions of working poor will be dropped from the tax rolls altogether, and families will get a long-overdue break with lower rates.”
High-income tax cuts became the Republican party’s economic policy priority – and depicting such gifts to the wealthy as a boon to the working class became the GOP’s political strategy. Indeed,Reagan,George W BushandDonald Trumpeach championed tax cut legislation that delivered disproportionate benefits to the rich, and fueled an explosion of economic inequality – all while presenting their agenda as fight-for-the-little-guy populism.
“I promised we would pass a massive tax cut for the everyday, working American families who are the backbone and the heartbeat of our country,” Trump said on the eve of signing his$1.9tn tax cut billin 2017. “We’re just days away [from] keeping that promise and delivering a truly amazing victory for American families. We want to give you, the American people, a giant tax cut for Christmas.”
This sales pitch became ubiquitous, and most political prognosticators assumed it would always be effective. Butsurvey datasuggests that most Americans have come to realize that while Tax Cut Santa Claus has been stashing big gifts under billionaires’ Christmas trees, he’s been leaving everyone else’s stockings empty.
Whereas more than half of Americans approved of Reagan’s first major high-income tax cut proposal, only about a third of Americans approved of Bush’s similar tax proposal at the same time in his presidency. By the time Trump assumed office for his first term, less than a third of Americans supported his high-income tax cut initiative, knowing that such policies have failed to benefit them personallyandfailedto boostthe macroeconomy.
Fast forward to Trump’s second term. In previous eras, a new Republican president delivering more tax cuts for the wealthy would be a foregone conclusion under Wanniski’s Santa Claus theory. But that political hypothesis is now buckling under the weight of Trump’s new $4.5tn proposal to extend his 2017 tax cuts.
In its current form, the White House’s initiative would delivermore than halfits benefits to the richest 10% of the country. Coupled with spending cuts and tariffs, Trump’s agenda would deliver a big income boost to the top 1%, while reducing the income of the bottom 80%, according to theCenter on Budget and Policy Priorities.
As Trump’s legislative agenda hits Congress, opposition to more high-income tax cuts is strong not just among Democrats and independents, but also among Republicans. Morning Consultreportsthat 70% of GOP voters believe “the wealthiest Americans should pay higher taxes” – a whopping eight-point jump from six years ago. Moreover, “roughly 7 in 10 voters, including 2 in 3 Republicans, support proposals to raise taxes on earners making more than $400,000.”
Republican leaders are responding with the previously unthinkable: proposals to raise some taxes on the rich. Indeed, Trump reportedlyfloatedthe idea and some GOP lawmakers areconsideringcreating anew top tax bracket.
This has touched off an intraparty civil war. On one side are those who came of age in the Reagan and George W Bush epochs –Newt Gingrich,Sean Hannity, the formervice-president Mike Pence, Americans for Tax Reform’s Grover Norquist, the hedge-funder-turned-GOP senatorDave McCormick, and the Club for Growth’sStephen Moore. This old guard believes Republicans can still get away with depicting billionaire giveaways as populism, and vilifying tax hikes on the rich.
“It’s vicious and full of envy. It’s a dumb idea. It’s bad for the economy,”saidNorquist, who spent the last quarter-century pressing Republicans to sign pledges to oppose all tax increases. “What happened when George Herbert Walker Bush raised the top rate? Let’s see, he lost the next election. We lost House and Senate seats and taxes went up and we had a recession.”
On the other side are newfangled Maga voices – the former Mitt Romney stafferOren Cass,Vice-President JD Vance, the former Trump strategist Steve Bannon, andreportedlyTrump’s budget director,Russell Vought. They sense political peril in Republicans presenting themselves as populists while their party enriches billionaires and corporations.
“We have to increase taxes on the wealthy,” Bannonsaidin December. This month he added that conservatives must prove “Republicans are not the country club Republicans”, which is “why it’s so important to not extend the tax cuts for the wealthy”.
Of the old anti-tax crowd, Bannon added: “They’re arrogant and they refuse to look at the reality of the situation we’re in … The times are totally different.”
Of course, we’ve been at these junctures before – moments when Republicans seemed to sense political vulnerability on taxes.
In 1985, Reagan tried to deflect Democrats’ criticism of his tax policy byinsisting: “There is one group of losers in our tax plan – those individuals and corporations who are not paying their fair share or, for that matter, any share. These abuses cannot be tolerated.”
Similarly, George W Bush momentarily pushed back against conservative aides pressing him to champion yet another tax cut for the rich. “Didn’t we already give them a break at the top?” he reportedlyasked.
But the powerful anti-tax movement of those eras convinced both Republican presidents to plow forward. Reagan followed up his first tax cut by furtherreducingthe top tax rate, and Bush’s sequel to his first tax cut was slashing taxes oncorporate dividends.
Trump could end up doing much the same. After all, ramming more tax cuts for the rich through Congress is the surest way for Trump to enrich himself, his family and the entirefront row of his inauguration.
But this time around, the long-term politics of taxes are in flux. Running the same tax play would show a Republican president siding with oligarchs against the preferences of his own party’s rank and file that no longer buys the Santa Claus theory.
That’s a new and unpredictable dynamic – one that may finally begin weakening the anti-tax movement’s grip on power in the years ahead.
David Sirota is the founder and editor-in-chief ofthe Lever, an investigative news outlet. Arjun Singh, Ariella Markowitz and Natalie Bettendorf are producers of the outlet’s weekly podcastLever Time, which is releasing a new miniseriesTax Revolt, on the 50-year history of the anti-tax movement now culminating in the Trump tax cuts.