The baby boom is being evicted from the penthouse of American politics. And on the way out, it has decided to trash the place.
That’s probably the best way to understand the generational implications of the tax legislation Republicans are driving through Congress.
The House and Senate measures shower enormous benefits on households at the top of the economic ladder, a group that by all indications is older and whiter than the population overall. Then it hands the bill for those benefits largely to younger generations, who will pay through more federal debt; less spending on programs that could benefit them; and, eventually, higher taxes.
In that way, the bills would intensify the generational inequity in how Washington allocates resources between the country’s increasingly diverse youthful generations and its predominantly white older population, groups I’ve called “the brown and the gray.” At a moment when political influence is inexorably shifting to the brown, the tax bill represents an 11th hour raid by the wealthiest of the gray.
Republicans’ strength among older whites, particularly those without college degrees and outside major urban areas, has been central to the political gains that gave the GOP unified control of the White House and Congress—and the leverage to advance a tax bill. But the demographic foundation of that political dominance is eroding.
The baby-boom generation, which has voted reliably Republican in recent years, has been the largest generation of eligible voters since 1978. But in 2018, for the first time, slightly more Millennials than baby boomers will be eligible to vote, according to forecasts from the Center for American Progress’s States of Change project. Higher turnout rates among baby boomers will preserve their advantage among actual voters for a while. But sometime around 2024, Millennials will likely surpass them. The post-Millennials, Americans born after 2000 who’ll enter the electorate starting in 2020, will widen the advantage. This generational shift will trigger a profound racial change: While about 80 percent of the baby boom is white, over two-fifths of Millennials and nearly half of the post-Millennials are not.
This transition looms over the tax debate. To fund its benefits for the wealthiest families and business, the GOP congressional plans raise taxes on so many subgroups of Americans that no generation emerges as an unequivocal winner. But the evidence suggests that those who gain the most—top earners, business owners, corporate shareholders—are concentrated among whites in the baby boom and the older members of Generation X. And from several angles, younger generations loom as the plans’ biggest losers. “What’s very clear through all of this is that the group that most pays are the younger people,” Eugene Steuerle, the co-founder of the non-partisan Tax Policy Center, told me.
People in the top income brackets will gain the most from the bills’ cuts in individual tax rates. Data from the Federal Reserve’s Board of Governors show that over one-third of households headed by someone age 45 to 59 earn more than $100,000 annually. Steph Curry and Taylor Swift notwithstanding, that’s true for less than one in 12 adults under 30. Likewise, the share of whites earning that much is roughly double that of African Americans or Hispanics.
People who own corporate stock and/or their own businesses will gain the most from the plans’ cuts in business taxes. Fed data again show that whites are twice as likely as non-whites to own one or the other—and that older adults are more likely to do so than younger people. Overall, the tax bills reward wealth, and wealth accumulates with age: Households headed by people between 55 and 64 years old have an average net worth that’s 15 times that of households headed by people younger than 35, the data show.
While the plans’ benefits flow mostly to older (and whiter) adults, younger (and non-white) Americans will absorb many of their costs. Young people are targeted by some specific components, particularly the House bill’s provisions to tax graduate-student tuition waivers and eliminate the deductibility of student debt. But the bigger risks are structural. Measured as a share of the economy, Washington today is spending nearly the lowest amount ever recorded on the domestic discretionary programs that invest in the productivity of future generations, such as education and advanced scientific research. By adding a projected $1.5 trillion to the federal debt, the tax bills will increase the pressure for further cuts. Compounding the effect, the bills would eliminate the deductibility of state and local income taxes; that will make it more difficult for those jurisdictions to raise revenue at a time when they are already retrenching their investments in education.
One of 21st-century America’s central dynamics is that an increasingly non-white workforce will be funding Social Security and Medicare for a rapidly growing number of white seniors as the baby boomers retire. These bills strip the public treasury exactly as that burden is intensifying—and they do so primarily by enriching some of those same boomers. That will steadily heighten pressure to cut those benefit programs.
Tellingly, though, the “Better Way” budget blueprint House Republicans released last year proposed delaying changes in Medicare until 2024, when almost all of the baby boom has already retired. That would leave younger generations, starting with Generation X, to bear most of any future cutbacks—even as they shoulder the costs for the boomers’ more generous retirement.
Young people will also pay the tax plans’ most direct cost: the interest on that $1.5 trillion in additional federal debt. More debt could benefit younger generations if it’s spent on investments in their futures. But this tax cut will bury younger generations in debt to fund the current consumption of their elders. As I’ve described before, the irony is that older, white America needs more of younger, diverse America to ascend into the middle class so it can generate the tax revenue to support the baby boom’s retirement. Yet with these tax bills, the old are strapping a boulder onto the backs of the young as they attempt that climb.