Moneybox

Americans Haven’t Noticed Trump’s Tax Cut in Their Paychecks. That’s Probably Because There Isn’t Much to Notice.

United States President Donald J. Trump talks about taxes as he prepares to sign the Tax Cut and Reform Bill in the Oval Office at The White House in Washington, DC on December 22, 2017.  / AFP PHOTO / Brendan Smialowski        (Photo credit should read BRENDAN SMIALOWSKI/AFP/Getty Images)
Donald Trump signing the Tax Cuts and Jobs Act.
BRENDAN SMIALOWSKI/Getty Images

When Republicans passed their $1.5 trillion tax cut in December, very few Americans expected to personally benefit from the legislation. Depending on the poll, somewhere between one-sixth and one-third of adults anticipated that their own tax bill was about to go down. In reality, far more households probably stood to benefit. The nonpartisan Tax Policy Center, for instance, estimated that about 80 percent of Americans would get a cut.

Why were so many people confused about what the tax cut meant for them individually? There were lots of theories. Maybe it was the press coverage, which tended to highlight the potential losers from the legislation, and how it would disproportionately benefit the rich. Maybe it was a bad sales job by Republicans, who made the mistake of rolling out early drafts of the bill that would have hiked taxes on more middle-class families than the final version. Maybe the public is just instinctively skeptical about large pieces of legislation rushed through Congress without much debate.

Regardless, Republicans were convinced that once voters started seeing their take-home pay go up, they’d come around to Trump’s sole big legislative accomplishment.

It seems Republicans were half-right. This month, the law’s new withholding rules finally went into effect, and the tax cuts finally started showing up in workers’ pay-stubs. And while the bill does seem to be getting more popular, most voters still say they haven’t noticed any personal benefits.

A handful of polls have shown that the public is generally feeling more warmly about the tax cut than three months ago. According to the New York Times, support is up to 50 percent, from 37 percent in December. A Monmouth poll showed approval surging to 44 percent from 26 percent.

Still, the vast majority of adults don’t seem to have sensed the effects of the tax cut on their personal finances. In a poll by Politico and Morning Consult, just 25 percent of registered voters said they’d noticed their take-home pay increase as a result of the legislation. Another 51 percent said they hadn’t noticed a pay bump, and another 24 percent said they didn’t know or weren’t sure.

We can only guess why so few people are picking up on the fact that their taxes have gone down. But I have a theory.

You might assume that the reality distortion field of partisan politics is to blame here. But that almost certainly doesn’t explain the entire perception gap. Only 33 percent of self-identified Trump voters in the poll say that they’ve noticed their take-home pay go up as a result of the tax cut. That’s better than the 21 percent of Hillary Clinton voters who say the same, but probably still far below the number who are actually benefitting at least slightly.

A more likely explanation, I think, is that for a lot of people, the tax cut is just way too small to pick up on, especially if you break it down into bi-weekly chunks. The Tax Policy Center estimated that Americans in the middle 20 percent of the income distribution who received any tax cut at all could expect their IRS tab to drop by $1,090 on average. If all of that money arrived at once, it would be easy to notice. But divide it by 26, and it comes out to $41 per paycheck. That adds up to real money for many families over time, but it might not jump out from a bank statement—very few of us have the eagle-eyed financial awareness of the public school secretary in Pennsylvania who noticed her paycheck go up by $1.50 a week. It’s going to be especially tough for people to pick up on the small changes in their tax withholding if their pay has changed for other reasons. According to the Federal Reserve Bank of Atlanta, which tracks pay growth for individuals over time, the median worker saw their wages rise 3 percent over the past year. Not many people are going to sit down and try to disentangle the effect of those annual raises on their paychecks from the effect of Trump’s tax cut, because why would they?

It’s possible that this won’t matter a great deal politically. More people seem to approve of the GOP’s bill than think they’ve benefitted directly from it, possibly because they think it has helped the economy. But if Americans aren’t noticing the tax cut in their take-home pay now, chances are they aren’t going to notice it later, either—meaning this may be as popular as the bill ever gets.