National Politics

GOP tax plans could fuel suburban revolt against Trump

Tax bill expected to reach floor this week

(CNN) - After a suburban firestorm in last week's elections, House Speaker Paul Ryan is now asking his Republican members from suburbia to put out the fire with gasoline

In the House of Representatives, Republicans representing white-collar districts were understandably unnerved by a roaring backlash against President Donald Trump in last week's elections, which carried Democrats to sweeping victories from northern Virginia to leafy communities outside New York, Philadelphia and Seattle.

Just days later, the House leadership is now pressing those same suburban representatives to back a tax reform bill that independent analysts say will raise taxes on many of their constituents, particularly in Democratic-leaning states and around the major metropolitan areas with the highest real estate values.

The skittishness of suburban Republicans from blue-leaning states, where Trump is already unpopular, leaves the House GOP facing a narrow road for passing the tax bill, which is expected to reach the floor this week. And if the legislation passes the House, as expected, it could leave Republicans facing an even rockier road in suburbia in 2018.

Tremors from the suburban uprising radiated from coast to coast last week. Democrats won county-level seats in Nassau and Westchester counties outside of New York City and Chester, Bucks and Delaware counties outside Philadelphia that they had rarely, or never, won before. In Seattle, Democrats captured a suburban Seattle state senate seat that gave them control of the chamber. And in New Jersey, big suburban margins in places such as Bergen County powered Democrat Phil Murphy's commanding win in the governor's race.

But the epicenter of last Tuesday's earthquake was northern Virginia. The results from the prosperous, growing, diverse and well-educated suburbs outside Washington, DC, clearly signaled that suburban voters unhappy with Trump were willing to express their discontent by voting against other Republicans on the ballot. In fact, the results signaled that Trump's weaker performance in 2016 than previous Republican nominees in well-educated suburbs around major cities may be a new normal for other GOP candidates so long as Trump's racially infused nationalism is defining the party.

The Virginia governor's race offered the most vivid example of this dynamic, which might be called The Trump Disjunction. Across the five key counties of northern Virginia, Hillary Clinton in 2016 posted measurably bigger victory margins against Trump than those same counties provided for Barack Obama in 2012, for Terry McAuliffe in his 2013 gubernatorial victory or for Mark Warner in his narrow 2014 Senate win against Ed Gillespie, the GOP's gubernatorial nominee this year. Last week, Democrat Ralph Northam expanded those margins -- behind remarkably high turnout.

Take Fairfax County, the state's largest. Obama won exactly three-fifths of the vote there, and McAuliffe and Warner both captured around 58%. Clinton expanded that to 64%, and then Northam swelled it to nearly 68%. The Democratic total in Arlington County and the city of Alexandria grew from around 70% for Obama, McAuliffe and Warner to about 75% for Clinton and about 80% for Northam. In the more distant suburb of Prince William County, Obama had won 57%, but McAuliffe and Warner each captured just slightly over half; Clinton expanded that advantage to 58% and Northam pushed it to nearly 61%. Loudoun County had split almost exactly in half in 2012, 2013 and 2014 (Gillespie actually carried it narrowly against Warner). But Clinton won 55% there and Northam neared 60%.

Combined with soaring turnout, this suburban surge provided Northam an insurmountable margin of about 270,000 votes just from those five counties. That was more than double the advantage those places provided McAuliffe in the previous governor's race. That towering wave also swept out enough Republican state legislators across northern Virginia to carry Democrats to the brink of a majority in the Virginia House of Delegates, pending recounts.

At the center of this suburban Democratic surge was growing opposition to Trump. From the start of his national political career, Trump's insular, racially confrontational agenda and belligerent personal style have thrilled many blue-collar, older and rural whites. But he's provoked much greater resistance in white-collar suburbs than Republicans usually face.

That resistance appears to be expanding, not diminishing. In last week's exit poll, just 18% of voters in northern Virginia said they approved of Trump's performance in office, while 79% disapproved, according to data provided by CNN polling director Jennifer Agiesta. In 2016, Trump had carried about a third of northern Virginia's vote. Similarly, a Los Angeles Times/USC Dornsife poll last week put Trump's approval rating in California's Orange and San Diego counties at a combined 32% -- just one year after he carried 43% of the vote in the former and 38% in the latter. Overall, among whites with at least a four-year college education, Trump's national approval rating now usually falls below 40% -- after exit polls showed him carrying 48% of those voters last fall.

Many Republican strategists consider passing tax reform essential to buttressing the GOP's position in the white-collar suburbs skeptical of Trump -- such as the four House Republicans from Orange and San Diego counties in seats whose constituents voted for Clinton. But the House's plan may be just as likely to further erode the party's defenses in those places. Independent analysts have found that the House bill raises taxes on a substantial portion of the upper-middle-class taxpayers in many of these suburbs. The reason is that to finance its cuts in income tax rates and corporate taxes, the bill eliminates an array of deductions popular with the upper middle class -- including those for student loans and for state and local income taxes -- while limiting local property-tax deductions to $10,000 and reducing the deduction for mortgage interest to $500,000, half its current level.

The Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, has calculated that by 2027 the House legislation would increase taxes for 29% of taxpayers between the 60th and 80th income percentile, 37% of those between the 80th and 90th percentile, and fully 47% of those between the 90th and 95th. And even the households in those groups whose taxes didn't increase would receive savings of $3,000 to $4,000 annually, relatively modest compared to their income. By contrast, the center calculated, while one-third of the top one percent would also pay higher taxes, those with reductions would receive an average cut of over $123,000.

The bite from the GOP bill is deeper for upper-middle-class families in major metropolitan areas, particularly in Democratic-leaning states where taxes, and usually property values, are higher. While only about one-in-five families between the 80th and 95th income percentiles in most red states would face higher taxes by 2027 under the House GOP bill, that number rises to about one-third in Colorado and Illinois, around two-fifths or more in Oregon, Virginia, Massachusetts, New York and Connecticut, and half or more in New Jersey, California and Maryland, according to a state-by-state assessment by the Institute on Taxation and Economic Policy, a liberal advocacy group.

That pattern has provoked loud complaints from some Northeast Republicans. "Let's stop pretending this tax proposal is good for everybody," Republican Rep. Dan Donovan of New York wrote last week. "The middle-income people of New York, California, Illinois and New Jersey are footing the bill for a tax break for people elsewhere."

Or, as Tom Davis, a former Republican representative from northern Virginia, puts it, the tax bill continues the process of "the Republican Party's base moving from country club to country."

Beyond the prospect of tax increases, the House bill could also threaten suburbanites in the most expensive real estate markets with downward pressure on the value of their houses, for many their largest investment. Skylar Olsen, a senior economist at Zillow, says that in most markets, the House proposal to limit the mortgage deduction to $500,000 "would have a fairly negligible effect" on home prices. But in more expensive real estate markets, she says, "I think we would expect home values to certainly slow down, if not decline a bit in the higher-end side of the market."

Olsen, like many economists, sees a strong case for limiting the mortgage deduction, which she argues does not increase the number of people who can afford homes so much as it increases the sizes of the homes people buy. But that argument may be more difficult to sell to middle-income homeowners when the retrenchment of the mortgage deduction is being used to finance tax cuts for wealthier families and businesses.

Zillow's data show that large numbers of homeowners benefit from the existing mortgage deduction not only in the biggest cities and suburbs along the coasts (from Orange County, California, to Fairfax, Virginia), but also in such prospering interior counties as DuPage, Illinois, Forsyth, Georgia, and Arapahoe, Colorado. Not all of the homeowners in such places, by any means, would lose ground under the GOP tax plan, but enough might to roil their politics.

Each of those communities is now represented at least partly by Republicans in the House. But they -- and their colleagues in other white-collar districts around the country -- will move even more firmly to the top of the Democrats' target list for 2018 if Republicans succeed in passing a tax bill that offers such uncertain prospects for the suburban voters already recoiling from Donald Trump.


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