Politically, The GOP Tax Cut Has Been A Huge Bomb
Republicans passed a tax cut bill in December they hoped would help in the midterm elections. It has turned out to be a big dud.
When 2018 began, Republicans were pinning their hopes for foregoing big losses in the midterm elections on the tax cut plan that was passed by Congress back in November, with just two weeks to go until Election Day, though, it’s pretty clear that the so-called Tax Cuts And Jobs Act is not helping Republicans at all:
Republicans thought their massive tax overhaul would be the centerpiece of their midterm strategy. But it turns out they were so wrong they’ve been barely mentioning the $1.5 trillion tax cut on the campaign trail.
With polls showing Americans are more likely to disapprove of the tax law than to approve of it, GOP candidates have been changing the subject to other issues like immigration and health care. Some of the lawmakers who wrote the Tax Cuts and Jobs Act are even struggling to hang onto their seats.
“I would have bet you a lot of money going into this year that, if you cut people’s taxes by thousands of dollars per year, that would be politically popular,” said Ryan Ellis, a prominent Republican consultant. “But it has not worked out that way.”
President Donald Trump tried to steer the conversation back to tax cuts on Saturday, telling reporters that the White House and congressional leaders are working on “a very major tax cut for middle-income people. And if we do that it would be some time I would say just prior to November.”
But, if anything, his remarks sparked confusion, since Congress is out of session until after the November election and can’t act before then.
Meanwhile, there’s a lot of frustration and second-guessing among Republicans over how they failed to sell the tax law to voters
“It’s Republicans once again proving the old adage that they are the stupid party,” said David McIntosh, head of the Club for Growth. “They’ve got a really good issue that they’re not using.”
Many blame Trump, saying he failed to use his power to set the public agenda to focus voters’ attention on the law, instead allowing a parade of controversies — on everything from immigration to tariffs to Vladimir Putin — to push the tax cuts off the front pages.
Grover Norquist, an antitax activist, blames reporters for the lack of GOP political leverage on the issue, saying many news organizations lost interest once the tax cuts were signed into law back in December.
“CNN hasn’t had me on in months, unless it’s to talk about tariffs,” he said. “They had zero interest in the effects of the tax cuts once they passed.”
Some point a finger at congressional Republicans. Large chunks of the public still don’t understand what was in the legislation, said David Winston, a longtime Republican pollster who advises GOP lawmakers.
The bill was pushed through Congress so quickly, and the debate was so circumscribed, that he says many voters never learned how the cuts affect them. Many have heard the law cut corporate taxes, but Winston says his polling indicates that only 35 percent are aware the law also cut individual tax rates at every income level,
This should hardly come as a surprise to Republicans or anyone observing the elections, of course. Even when the tax cut bill was being debated in December, polls were showing that the overall bill was not nearly as popular with the general public, as evidenced here, here, and here. Notwithstanding these numbers, party leaders assured members of the House and Senate who may have been reluctant supporters that the tax bill would be for the party in 2018 once it was passed and the benefits of the bill became apparent. As it turned out, the exact opposed happened. By April, the support that had existed for the bill had virtually evaporated and Republicans were blaming that fact not on the bill itself, but on President Trump. More recently, a poll by NBC News and The Wall Street Journal in August found that just 27% of respondents supported the tax reform bill while 36% called them a bad idea. The RealClearPolitics average meanwhile finds that an average of 39% of those polled approve of the bill, while 42.5% disapprove.
One of the main reasons that the tax cut has fallen flat with voters appears to be the fact that they have not seen any benefits from it so far. Republicans promised, for example, that the cut in corporate taxes would lead to a spark in economic activity and hiring that would be measurable by the time the midterms rolled around. While there has been a modest tick upwards when it comes to growth in Gross Domestic Product, the jobs picture has not improved noticeably. As I noted when the September jobs report was released earlier this month, jobs growth for this year, and for the majority of the Trump Administration’s time in office, has been roughly the same as what we saw during the second term of former President Barack Obama. Additionally, wage growth, which many economists are now saying is the more important number now that we’re nearing the point of full employment, has been stubbornly slow for the past two years. Meanwhile, the corporate expansions that Republicans said would happen are not materializing and many corporations have been using the tax savings they are receiving from the new tax law to fun stock buybacks. Additionally, the changes to corporate taxes have not resulted in the repatriation of corporate profits parked overseas that Republicans claimed would occur in the wake of the tax cuts.
In addition to this, the actual impact on the pocketbooks of the average American from the tax cuts has been minimal at best. The changes to the law, for example, did not apply to the taxes that people were required to file and pay by April 15th of this year. To the extent that the average American has felt any impact from the tax cuts, it has come in the form of bonuses or changes to tax withholding that has had, at best, a modestly positive effect on take-home pay. In the first regard, the Administration made much of the fact that, in the wake of the passage of the tax cut, some corporations announced bonuses that they would be paying to their employees. In reality, though, most of those bonuses were paid before the end of the year in 2016, meaning that they were taxed at the rates that were in effect before the passage of the new tax law. On the withholding side, estimates have been that the withholding changes made necessary by the changes to the tax code have resulted in roughly an additional $30 per paycheck for the average American. That amounts to roughly $500 over the course of the year. While this is not an insignificant number for people living paycheck to paycheck, it’s hardly something to write home about. To the extent that most Americans will feel the benefit from the December 2016 tax cut, it won’t come until next year when they’re preparing that tax returns and, of course, it will be too late for Republicans to benefit from that politically.