By David Morgan and Bo Erickson
WASHINGTON (Reuters) -Republicans are loudly embracing President Donald Trump’s populist priorities, though critics say a sweeping tax-cut bill that offers some breaks to working-class Americans still favors the wealthy and threatens social benefits his voters rely on.
After weeks of pressure from the president’s MAGA base, Republicans in the U.S. House of Representatives are advancing legislation that includes tax breaks for workers who rely on tips and overtime pay, allows people to deduct interest on loans for U.S.-made cars, and proposes government-funded $1,000 MAGA savings accounts for U.S. children born between 2025 and 2028.
They have reason to do so: voters in households earning between $30,000 and $100,000 a year swung heavily in Trump’s favor in November, and the party will need their support in next year’s midterm elections, when Democrats will seek to retake control of Congress.
“My priority has been to deliver for the working class and working families, and that is in fact what this bill will do,” said Republican Representative Jason Smith, chair of the tax-writing House Ways & Means Committee, who noted that he grew up living in a trailer in southern Missouri.
The message is a far cry from the free-market priorities Republicans prided themselves on a decade ago, and combined with Trump’s tariff regime and executive order to cut drug prices, shows the encompassing sway that his populism now holds over the party.
White House spokesperson Harrison Fields described the House bill as “vital relief” for families. “The No Tax on Tips, Overtime, and Social Security policies — are all included in the House bill, and the administration is going to continue to push these and other critical priorities through the legislative process,” Fields said.
Democrats question how much the bill will really help working-class Americans. Based on a nonpartisan Joint Committee on Taxation analysis, they calculate that people making less than $50,000 per year would get $263 in tax relief while those making over $1 million would get more than $81,000.
“There’s no reason we can’t focus this tax relief on the people that are out there working hard for a living and not the Elon Musks of the world,” said Representative Lloyd Doggett, a Democratic tax writer from Texas.
Republican lawmakers acknowledged the support of working-class voters will be critical to their chances of protecting their 220-213 House majority and 53-47 Senate edge next year.
“They’re vitally important,” Republican Senator Markwayne Mullin of Oklahoma told Reuters. “We expect them to play a vital role in the midterms.”
Some Democrats have pushed for these policies as well, including former Vice President Kamala Harris’ adoption of Trump’s no tax on tips proposal during the 2024 presidential campaign.
Representative Suzan DelBene, a Democratic tax writer who is also in charge of her party’s midterm campaign apparatus, encouraged Democrats in competitive districts to talk collectively about the tax package while they embrace some of the tax proposals.
“Folks are going to talk about the things they support and are willing to do, but if you look at this overall package, you have so many things that are damaging for seniors and for families,” the Washington Democrat said.
NO ‘NORTH STAR’
But independent analysts say the emerging House legislation is less a demonstration of populist unity than evidence of the party’s need to cobble support from disparate factions. Others warn the public focus on working Americans ignores the need for greater economic growth to help cover a price tag of more than $3.7 trillion for the tax cuts, which will add to the nation’s $36.2 trillion in debt.
“They are caught in the Trump era of policy that doesn’t have any North Star. And so they’re trying to cobble together a coalition,” said Adam Michel, who oversees tax policy studies at the libertarian Cato Institute think tank.
“Instead of the traditional Republican recipe of lower tax rates and a broader tax base, they are going in the opposite direction where you have to buy votes with special privileges.”
Analysts said the tax cuts approved by Smith’s Ways & Means Committee on Wednesday provide about two-thirds of the benefits to the top 20% of earners, while taxes would actually increase for workers in the lowest income bracket.
Some working-class Americans could also find that tax breaks aimed at them fall short of expectations.
While the legislation provides temporary tax relief for working people who earn tip income and overtime pay and for senior citizens receiving Social Security benefits, it does not eliminate taxes entirely, despite Trump’s 2024 campaign pledge. Instead, the bill provides deductions that may not help much.
“The value of those deductions is related to the tax rate you face. And so, sort of by definition, those income-tax deductions do not deliver a whole lot of help, especially for lower-income Americans,” said Joe Rosenberg, senior fellow at the left-leaning Urban Institute.
The center-right Tax Foundation estimates that the proposals could grow the economy by 0.6% over the long-run, down from a larger 1.1% growth estimate based on making all the expiring provisions permanent, including growth-oriented policies.
The think tank estimates that the smaller growth rate would be completely overwhelmed by downward economic pressure from Trump’s tariffs, not counting retaliatory tariffs by U.S. trading partners.
“I would say it’s not really a tax reform package. It’s not really a growth-oriented package,” said Erica York, vice president of federal tax policy at the Tax Foundation. “It’s simply a deficit-financed tax cut package.”
That could change if the bill makes it out of the House and over to the Senate, where some Republicans want to amend it with their own legislation to add permanent business tax cuts.
“Our preference would be, and we have a lot of our members who are heavily invested in the idea, to make particularly the business side of the code permanent,” Senate Majority Leader John Thune told Reuters.
(Reporting by David Morgan and Bo Erickson, additional reporting by Jarrett Renshaw; Editing by Scott Malone and Alistair Bell)
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