President Trump took credit for tax reform and the strong economy during his first State of the Union address, and in doing so pitched a message that Republicans hope will resonate with voters ahead of the 2018 elections.
“Just as I promised the American people . . . we enacted the biggest tax cuts and reforms in American history,” Trump declared. In turn, roughly 3 million workers have already received “tax cut bonuses” and will soon see lower taxes. “This April will be the last time you ever file under the old broken system -- and millions of Americans will have more take-home pay starting next month. A lot more,” Trump said.
Business confidence “is at an all-time high,” Trump continued, and in turn, the value of Americans’ retirement and college savings accounts “have gone through the roof.” He also touted announcements by companies like Apple Inc. and Exxon Mobil Corp., which have announced billions of dollars of new investment in the U.S., he said.
However, despite being armed with strong economic numbers and a bevy of corporate press releases announcing bonuses or new investment because of the tax law’s passage, Republicans have thus far had trouble convincing the public that they’ll be better off under the Tax Cuts and Jobs Act (P.L. 115-97).
Results of a Reuters/Ipsos poll released January 29 suggest that Trump’s narrative about workers receiving bonuses and wage increases because of the tax cuts is, for now at least, more anecdotal than indicative of a broad-based trend.
That poll, conducted between January 12 and January 23, found that only 2 percent of U.S. adults said they had received some benefit attributable to the tax law, such as a bonus or pay raise. Further, only 24 percent of respondents to that poll said they expect to owe less taxes, while 27 percent said they expected to owe more. A majority also said that wealthy individuals and corporations are the biggest beneficiaries of the tax cuts.
Those results generally comport with other surveys since the tax law’s enactment. A January 11 Quinnipiac University poll indicated that most demographic groups disapprove of the tax law, as have other polls released throughout January.
Hours before Trump’s address, House Ways and Means Committee Chair Kevin Brady, R-Texas, acknowledged that there was room for improvement in the Tax Cuts and Jobs Act’s public image, but that the speech was a “great opportunity” for Trump to remedy that.
“He gets to do something that rarely do presidents have the opportunity [to do], which is to say, ‘I delivered,’” Brady said on Fox Business. He added that he was confident that, by the end of February, once the withholding tables are adjusted and the changes are reflected in workers’ paychecks, “they’ll know they’ve been duped by the Democrats.”
Daniel Palazzolo, chair of the University of Richmond's Department of Political Science, told Tax Analysts that midterm election outcomes are traditionally dictated by the state of the economy and a president’s approval. Part of what makes predicting the 2018 election outcome tricky is that while the economy is strong, Trump’s approval rating remains low.
GOP Counting on Trump
“The Republicans would certainly benefit from more favorable views of Trump and a growing economy, which they could attribute broadly to GOP policy, especially tax reform. Congressional Republican leaders are counting on Trump to move the needle of public opinion regarding tax reform and approval,” said Palazzolo, who teaches on U.S. elections and politics.
However, even if Republicans win the messaging war on tax reform, other factors may still have outsized importance. Democratic voter turnout in the Virginia election and the Alabama special election “had little to do with tax reform and more to do with Trump’s leadership,” according to Palazzolo. “So tax reform and growth can help inspire the GOP base, including donors, but it may not be enough to offset the general mood of resistance against Trump and Republicans,” he said.
Nevertheless, Republicans are angling to reshape public opinion on the tax law ahead of the November election.
A spokesman for the conservative group Freedom Partners said that they, along with Americans for Prosperity, are planning to spend $20 million on an education campaign through the end of the year, showing how the new tax law is benefiting Americans and helping the economy. And groups like Grover Norquist’s Americans for Tax Reform are keeping a running list of companies paying bonuses.
On the flip side, critics of the tax law have questioned the hype surrounding its purported benefits. A January 29 report by Americans for Tax Fairness found that only 46 companies on the Fortune 500 list have announced plans to improve employee pay or benefits as a result of the tax cuts.
Rep. Joe Kennedy III, D-Mass., criticized the Republican approach to policy in the Democratic response to the State of the Union.
Kennedy said the tax cuts created under the Tax Cuts and Jobs Act are part of a series of policies that Republicans are using to turn “American life into a zero-sum game.”
“We can cut taxes for corporations today if we raise them on families tomorrow,” Kennedy said, referring to the law's provision that makes tax cuts temporary for individuals but permanent for corporations.
He also shot back at Trump's celebration of rising stock market values, saying Democrats “see an economy that makes stocks soar, investor portfolios bulge and corporate profits climb but fails to give workers their workers their fair share of the reward.”
In his speech, Trump renewed his call for a new infrastructure initiative, although now with an even more ambitious end goal: $1.5 trillion in new infrastructure investment. Trump had previously called for leveraging $1 trillion in new infrastructure investment with only $200 billion in direct federal spending, with most of the investment to come from private investors through public-private partnerships.
A recently leaked draft outline of the White House infrastructure plan indicated that the administration is looking to expand the use of tax-exempt private activity bonds to help facility private investment in public projects.
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