What's the Worst Part of the GOP Bill? Let's Get Specific.

We’re taking health care away from poor families to create budget space for an esoteric tax cut that narrowly benefits millionaire auto dealers and independent consultants.

Photo by StellrWeb on Unsplash

I’ve been thinking a lot recently about the value of specificity in politics and messaging.

Zohran Mamdani isn’t just charismatic; he’s charismatically specific. In his campaign videos, he’ll walk through city bodegas to tell voters how he might tweak the details of urban retail policy.¹ Rep. Marie Gluesenkamp Perez, a rising star in the Democratic Party, went viral after the election with a straight-to-camera campaign to fix an esoteric regulation that barred daycare workers from peeling bananas to feed infants. She painstakingly explained that peeling fruit technically violated food-processing standards, and so young kids risked going hungry because their teachers were afraid of anti-peeling lawsuits. On the right-of-center podcast Flagrant, Pete Buttigieg also went viral, not by offering a familiar criticism of Donald Trump, but rather by giving a detailed day-in-the-life description of what America would look like if sensible liberal ideas won out.

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Mamdani, MGP, and Buttigieg represent distinct corners of the Democratic tent. But their communicative successes all borrow from the same lesson. In politics today, specificity is a superpower. Specificity tells voters: I care so much about your frustration that I’ve sought to deeply understand the details of what’s behind it. Specificity doesn’t just offer a story to grab people’s momentary attention. It promises agency. If we can name our problems, we can fix them.

In that spirit, I want to offer a critique of the GOP tax and spending bill that descends from the rafters and articulates its worst elements in a very specific way. Yes, this bill is a reckless debt bomb and perhaps the largest cut to the social safety net in US history. But also, at a very granular level, it represents a narrow tradeoff between two American constituencies that tells us something important about the GOP’s political priorities.

It’s Millionaire Auto Dealers vs. Moms on Medicaid

One of the most important yet least-discussed elements of the GOP tax-and-spending bill is the expansion of the Section 199A pass-through deduction. This might sound weedy and esoteric. But by some measures, it’s one of the most expensive provisions of the so-called Big Beautiful Bill. And to truly understand this tax change is to see in 8K clarity just how nuts this bill really is.

Let’s imagine a guy named Derek. He makes a fortune on floors. He rips up, repairs, and replaces flooring. He goes around to schools and corporate offices and does thousands of miles of flooring. It’s great work. Derek's company makes $50 million a year. It’s structured as an S Corporation, which means the company doesn’t pay income taxes. Instead, the profits pass through to shareholders, like Derek, who can pay himself a share of the operating profits and save lots of money on taxes.

This isn’t a goofy hypothetical I made up because of a longing to quit journalism and get into carpets. Derek Olson is the chief executive of National Flooring Equipment. As the Wall Street Journal explained, Olson is a typical member of the 1 percent, part of what the economists Owen Zidar and Eric Zwick call the “stealthy wealthy.” These are business owners in non-glamorous trades who often make millions of dollars a year and benefit from pass-through provisions in the tax code. As the Journal explains:

The largest source of income for the 1% highest earners in the U.S. isn’t being a partner at an investment bank or launching a one-in-a-million tech startup. It is owning a medium-size regional business. Many of them are distinctly boring and extremely lucrative, like auto dealerships, beverage distributors, grocery stores, dental practices and law firms, according to Zidar and Zwick.

Their analysis of anonymized tax data from 2000 through 2022 suggests the importance of such business ownership to the U.S. economy has grown. The share of income that ownership generates has increased to 34.9% in 2022 from 30.3% in 2014 for the top 1% earners.

It has increased even more at the topmost levels. The top 0.1% highest-earners saw 43.1% of their income come from such business ownership in 2022, compared with 37.3% in 2014. (The minimum income threshold in 2022 to qualify for the top 0.1% of earners was $2.3 million, according to Zidar.) … The number of such business owners worth $10 million or more, adjusted for inflation, has more than doubled since 2001, to 1.6 million as of 2022.

The Big Beautiful Bill contains a provision that makes it easier for these business owners (and high-income professionals who set up pass-through entities) to deduct up to 23 percent of their net business income from tax. This one tax measure is projected to cost the US treasury more than $800 billion in the next 10 years.

What noble cause does this serve? It looks like a handout for America’s richest auto dealers, surface-restoration barons, and consultants with pass-through entities. I don’t think there’s anything morally egregious about people who set up these tax vehicles. Legally reducing one’s tax burden is each citizen’s right. Creating sensible and moral tax policy is every government’s obligation. The Section 199A change is neither sensible nor moral. Pass-through income is the most common source of income for a microscopic sliver of the country: the top 0.1 percent. The very last thing we should be doing is burning an $800 billion hole in the budget deficit by narrowly tailoring a tax cut for the richest 1/1000th of the country.

Economists don’t agree about much. But they are "nearly united" against extending and expanding this Section 199A rule, William G. Gale and Samuel I. Thorpe write in a Brookings essay. “Put simply, the rule has proven to be expensive, regressive, complicated, ineffective in promoting investment, and unfair to wage earners.” Unpacking each adjective, they elaborate:

Expensive: Extending it would cost over $700 billion over the next 10 years, and the other proposed changes would cost another $100 billion or more.

Regressive: The benefits are highly skewed to the affluent … 44 percent of the tax benefits would go to taxpayers with annual incomes above $1 million.

Complicated: The deduction is notoriously complex and encourages tax-driven income shifting rather than economic growth.

Ineffective: The stated rationale for enacting the deduction was to create jobs and raise investment. But research shows the deduction did neither. One paper found “little evidence of changes in real economic activity,” including investment, employee wages, or job growth, while another found that 199A led to zero change in employment.

Unfair: A fundamental principle of an income tax is that two different people with the same income and same economic situation (both married, both have children, etc.) should pay the same tax. But the 199A deduction arbitrarily favors business income over wages, encouraging taxpayers who have the means to relabel their income to avoid paying taxes.

Speaking of tax changes that serve little economic purpose, the GOP bill also eliminates estate taxes for single filers with up to $15 million and married couples with more than $30 million. By definition, this policy only applies to families with tens of millions of dollars in wealth. The combined cost of these policies—the 199A change and the estate tax exemption—is just north of $1 trillion.

Now let’s look at the spending side of the ledger. Infamously, the GOP bill reduces spending on Medicaid and food stamps, or SNAP, by about 20 percent. These policies are projected to throw 10 million low-income Americans off Medicaid and other subsidized insurance plans, while yanking food assistance from about two million poor households. The budgetary savings from these cuts? Just north of $1 trillion.

There is a mathematical elegance to this sort of madness. The policies might be esoteric, but the tradeoff could not be clearer. We’re throwing poor families off health care and food assistance to make budgetary space for American dynasties and the “stealthy wealthy.” We’re deliberately making life worse for the poorest people in America so that we can extend a tax cut that has been shown to achieve practically nothing for job growth, investment growth, or economic growth. Donald Trump’s GOP is showing its values and its virtues: generous tax breaks for dynastic wealth and new paperwork requirements for the working class. Democrats will have many opportunities to run against this thing. When they do, let’s hope they get specific.

1. That I don’t like some of these policies is substantively important, of course. But here, I’m trying to make a point about political attention.