As Republican leaders hit the road to promote the 2017 tax law’s virtues for working families, recent polling suggests they may have to prepare for a long trip.
At a March 7 stop in Versailles, Kentucky, Vice President Mike Pence declared that 2017 was the year of “promises made and promises kept,” and that American workers had the Tax Cuts and Jobs Act (P.L. 115-97) to thank for increasing their paychecks.
Pence said wage growth had been “stuck in neutral,” but that because of the TCJA, “Americans are seeing their paychecks rise faster today than at any point in more than 10 years.” Around 90 percent of working families will see the tax cuts reflected in their paychecks this year, with the average family of four in Kentucky saving nearly $2,100 per year, he said.
Pence predicted that working Americans will see even more wage growth as businesses invest their tax savings in American employees and new hires. The TJCA has “given them unprecedented opportunities” to increase pay for employees and make the kind of investments that create new jobs, he said.
Although distributional estimates of the TCJA support Pence’s assertion that most Americans will see a tax cut, a recent Morning Consult/Politico poll conducted from March 1 to March 5 suggests that most Americans have yet to notice the promised paycheck increase.
According to the poll, only 27 percent of the nearly 2,000 participants reported noticing an increase in their paychecks over the past few weeks as a result of the tax law, while 50 percent said they observed no change. The remainder said they didn’t know.
Of those that reported seeing more take-home pay, 67 percent said it made them more likely to support the TCJA.
Expectation vs. Reality
Explaining the disconnect between the predicted benefits of the tax cuts and what taxpayers are reporting is tricky.
“We’ve seen this before,” said Brian Riedl of the Manhattan Institute. Riedl said that after both the 2001 George W. Bush tax cuts and the Making Work Pay tax credit — a provision in the 2009 stimulus bill — were enacted, most taxpayers said they didn’t notice any reduction in their taxes, even though the cuts were nearly universal.
“I think there’s a perception among the electorate that they’re always getting cheated,” Riedl said. “When taxes are cut, people don’t believe it.”
Eric Toder, co-director of the Urban-Brookings Tax Policy Center, observed the opposite effect during Clinton’s presidency: Even though the 1993 tax increases only raised taxes on 2 percent of the population, 45 percent of taxpayers said they believed their taxes had gone up, he said.
Toder cited his organization’s estimates when he noted that even though around 80 percent of taxpayers will get tax relief after accounting for all provisions, including the corporate tax cuts, only around 65 percent will see their individual income tax liabilities reduced.
Howard Gleckman, also of the Tax Policy Center, suggested that it’s possible that some individuals’ tax cuts were swallowed by increases in their health insurance premiums, or that they are over-withholding, so their overall take-home pay appears largely unchanged.
Both Riedl and Bill Schneider, a political analyst and professor at George Mason University, said that the disconnect may not ultimately matter when it comes time to vote in the November midterm elections.
Riedl said that, contrary to polling both before and after the TCJA’s enactment suggesting that the bill was widely unpopular, “people are now realizing they’re not getting a tax increase.” For most individuals, the tax cuts won’t have a large effect on their finances either way, so most people will base their votes in the coming midterm elections on issues other than tax cuts, he concluded.
Schneider said that for most people, their paycheck increases are likely small and spread out over the course of a year. “I think for most people, it just goes right past them,” he said.
Schneider added that voters are typically driven more by how they view the economy and nation as a whole, rather than by what their own paychecks look like — an effect known as “sociotropism,” in which people vote in the direction they see society going.
“People’s politics [are] based on what they see and hear from others, what’s happening all around them and around the country, not primarily on their own experience,” Schneider said. If consumer confidence is up, news about the economy is largely positive, and people see those around them doing well, then they “tend to have greater confidence in the economy, and they always attribute that to the president,” he said.
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