The Political Notebook 5.20.2025
A tax cut or avoiding a tax increase? Too early for Arizona Democrats to be crying in their beer.
A false framing of the budget reconciliation choice
Democrats are framing the budget reconciliation issue as an attempt by Republicans to cut low-income programs to pay for tax cuts for the wealthy. That’s not an accurate description of the policy choice before Congress.
The Budget Act was supposed to create an orderly process for Congress to make macro decisions about how much the federal government was to raise and spend. Instead, it has become a source of political gamesmanship and disorder. Under the rules adopted to avoid the Senate filibuster under the act, limits are placed on the effect on deficits beyond the ten-year planning horizon. That results in provisions phasing in and out. Stability and predictability are fiscal virtues the Budget Act, as implemented, now undercut.
The corporate tax rate reduction from Trump’s first-term tax bill was made permanent. However, most of the individual tax provisions phase out after this year.
The first-term tax bill substantially increased the standard deduction and reduced rates across all income brackets. Extending these provisions, or better yet making them permanent law, isn’t really a tax cut. It’s avoiding a tax increase that would hit middle-class and upper middle-class taxpayers with quite a whack.
Nor does extending them actually increase the deficit. It is continuing the status quo. That’s bad enough, but it isn’t really making the fiscal situation worse.
The current-law approach of scoring these things, employed customarily by the Congressional Budget Office, treats this continuation of the status quo as an increase in the deficit, since current law would revive a smaller standard deduction and higher rates. More important than how the policy is scored, however, is its economic effects. Economically, not extending the individual income tax provisions would be a big tax increase with predictable adverse effects on an economy already skittish from tariff whiplash.
Moreover, Democrats actually support continuing Trump's first-term tax provisions for all but the very wealthy. The reduction in the top bracket rate was modest, from 39.6% to 37%. Continuing all of the individual tax provisions is scored, according to the current-law method, at $2.75 billion over the 10-year planning period. Not including the top rate, allowing it to return to 39.6%, would cut that by only around 15%.
There are new tax provisions in the reconciliation bill that would increase the deficit even with a current-policy scoring. These include Trump’s pandering campaign pledges to reduce tax liability related to such things as tips, Social Security benefits, small business pass-through income, state and local taxes, and auto loan interest. Democrats have also expressed support for many of these measures.
In short, the things Democrats would support in a reconciliation bill would also, in a current-law accounting, be scored as substantially increasing the deficit.
The country badly needs a grown-up discussion about what we want the federal government to do and how to pay for it in a sustainable way. At this point, neither of our two major parties shows the slightest interest in participating in, much less initiating, such a discussion.
A number to watch in Arizona for the 2026 election
The New York Times recently ran a piece about how Arizona Democrats are crying in their beer over their prospects in 2026, when most statewide offices are on the ballot. I have a contrarian view, with an important reservation.
At this early stage, my sense is that the 2026 election is shaping up very much similar to the midterm elections of 2018 and 2022. Both were, in part, reflections of Trump fatigue, at least in Arizona.
In 2018, even though the economy was doing decently, Democrats picked up over 40 U.S. House seats. In Arizona, a Democrat, Kyrsten Sinema, won a U.S. Senate seat for the first time in three decades.
Arizona unusually has had a U.S. Senate seat on the ballot in four consecutive election cycles. Democrats have won all four.
In addition to winning the Arizona U.S. Senate election in 2022, Democrats won the three most important state offices: governor, secretary of state, and attorney general. In all three races, a Trump-endorsed candidate won the GOP primary over more qualified and electable opponents. And the all-MAGA slate lost in the general election.
Trump is the only MAGA candidate to win a prominent statewide election in Arizona. And even in the two elections in which he carried Arizona, his margin was substantially less than was Mitt Romney’s in 2012. Arizona isn’t MAGA country.
It appears likely that Republicans will again field an all-MAGA ticket for the major state offices in 2026. Nationally, Trump fatigue is settling in even more quickly and extensively than it did in 2018. All of this points to a favorable environment for Arizona Democrats in the big races in 2026, with the usual caveats about this being way early and events can change prospects considerably. The current disarray in the state Democratic Party’s official apparatus isn’t anything competent candidate campaigns can’t overcome and compensate for. Pre-Trump, GOP candidates in Arizona had to do so periodically, and did so successfully.
Here is the reservation. The Joe Biden experience appears to have tarnished the Democratic brand in Arizona.
During the early Trump period, Democrats had narrowed their registration disadvantage. In 2014, an election that featured a Republican sweep, the GOP registration advantage was 5.5 percentage points. By 2020, the year Biden took Arizona’s Electoral College votes, the advantage was down to 3 percentage points. That crept up to 4 percentage points in 2022, the year Democrats swept the major state offices.
For the 2024 election cycle, the GOP registration advantage had swollen to 6.8 percentage points Today, it is an astonishing 7.3 percentage points.
Now that’s not a death knell for Democratic prospects. There are hundreds of thousands of swing-voting independents and disaffected Republicans that Democrats have a chance of persuading, particularly against a MAGA candidate. Ruben Gallego was able to overcome the swollen registration disadvantage in 2024, keeping the U.S. Senate seat in Democratic hands.
Still, it’s a steep uphill climb, politically. The registration disadvantage will be a key number to watch heading into 2026. My guess is, if a tightening occurs, it will come as much from a reduction in the GOP percentage as an increase in the Democratic one. In other words, from general political trends rather than organizational prowess.
Reach Robb at robtrobb@gmail.com.