Moneybox

Instead of Passing Their Lame Tax Law, Republicans Should Have Just Handed Out Trump Bux

US President Donald Trump speaks about his meeting with Russian President Vladimir Putin ahead of a meeting with Republican lawmakers and cabinet members on tax cuts at the White House in Washington, DC, on July 17, 2018. (Photo by NICHOLAS KAMM / AFP)        (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)
What could have been.
Nicholas Kamm/Getty Images

Everybody hates Donald Trump’s tax law.

OK. Not everyone. I’m exaggerating. But as of Monday, the first tax day on which Americans are filing their personal returns under the regime set up by the Tax Cuts and Jobs act of 2017, the bill is decidedly unpopular—less beloved, even, than the perpetually underwater president who signed it. According to Gallup, 40 percent of all Americans (and just 32 percent of political independents) approve of the thing. Pew, similarly, finds just 36 percent give the law a thumbs up.

A big part of the problem, it seems, is that most people do not believe that Republicans actually cut their taxes, and in many cases are under the impression that they were on the receiving end of a tax hike. According to a survey by the New York Times and SurveyMonkey, only 40 percent of adults believe their taxes dropped under the new law. The number has been even lower in other polls. Gallup reports that only 14 percent of Americans think that their federal income taxes went down due to the statute, while 21 percent believe they rose, with 64 percent who were unsure or thought they’d stayed the same. CBS got a similar result: 25 percent believed their taxes were lower, 32 percent believed they were higher, and the rest thought there’d been no change.

Most Americans are almost certainly mistaken about this. The Tax Policy Center has estimated that about 65 percent of taxpayers should have seen their liability drop this year, and just 6.3 percent should have seen a hike. The gap between reality and perception is so large that the New York Times felt compelled to run an article on Monday titled,”Face It: You (Probably) Got a Tax Cut.”

Politically, this is an astonishingly bad outcome. According to the most recent forecasts, the GOP’s tax cut will ultimately cost $1.9 trillion over a decade. As I’ve written before, for about that much money, they could have sent a $1,000 check to every worker in America (and adjusted it for inflation) for the next ten years. Heck, they could have included an auto-signed picture of the president to go along with it; instead of a bunch of stories about how nobody realizes they got a tax cut, the headlines would be all about how Americans were spending their Trump Bux.

Why is the public so ill-informed about the effects of the GOP’s tax bill? Conservatives would probably blame the media. But Republicans made a series of fateful choices that helped doom their legislation in the public eye.

For starters, many initial versions of the GOP’s legislation did raise taxes on a surprisingly large share of middle and upper-middle-class Americans, which journalists naturally covered, and Democrats turned into a sticky narrative that the legislation was a broad, middle-class tax hike.1 The bill’s benefits were also tilted toward high earners and corporations, which contributed to the impression that there was little for your typical family in the law. It also curtailed some especially popular bits of the tax code, such as the deductions for state and local taxes and mortgage interest, which caused an uproar in places like the Northeast where many voters have long relied on them. Later iterations of the bill created fewer losers. But Republicans were never able to shake away the impression that they had crafted legislation that hiked taxes on a bunch of homeowners in New Jersey and California in order to shave down Walmart’s IRS tab.

But the bigger issue was seemingly much simpler than all that: For most Americans, the tax cut was just kind of small and easy to miss. The Tax Policy Center estimates that, among the middle 20 percent of households, the average tax cut amounted to just $1,050 on average. Strung out across a whole year, it amounts to just $40 per bi-weekly paycheck. That amount is not especially noticeable, especially since Americans often see their incomes change year-to-year (they get raises, their hours change, etc.). The administration probably made this problem a bit worse for themselves by tweaking the IRS withholding rules to maximize how much of the tax cut showed up in workers’ take-home pay, rather than giving families a bigger refund at the end of the year, where they may have actually picked up on it. (According to the IRS, the number and average value of tax refunds are both basically flat compared to last year).

The fact that their tax cut has turned out to be widely despised does not mean it was a total political loss for Republicans. It handed large tax cuts to corporations and high-earners who will happily continue donating to the party’s coffers; the GOP scratched capital’s back, and capital will likely scratch theirs back.

But there are lessons to be learned here. If you’re going to cut people’s taxes, don’t write a bunch of draft bills that make it look like you’re raising them instead. And once you do pass the legislation, make sure people realize they actually got a cut.

In other words, give them Trump Bux.

1Take the early Senate bill: Congress’s Joint Committee on Taxation estimated that, by 2023, about 13 percent of all Americans, 20 percent of those earning $75,000 to $100,000, and 27 percent of those making $100,000 to $200,000, would have seen a hike under the legislation.