Tax Analysts Blog

For Republicans, an Unpopular Tax Cut May Be Better Than Nothing – But Still Not Enough

Posted on Dec 1, 2017

The GOP is in a tax panic. Pressured by donors and worried about the 2018 midterm election, party leaders have convinced themselves that a tax cut is vital to their political survival. The unseemly result? A headlong rush to get something – anything – passed into law. 

Republicans might be right about their need for a tax cut. The tax legislation making its way through Congress is remarkably unpopular.[1] In fact, this tax cut is polling worse than many past tax increases.[2] But when it comes time to face the voters, Republicans might be better off with an unpopular accomplishment than showing up empty-handed.

But the politics of tax cuts can be tricky. It seems like tax reductions should be a slam-dunk for political parties, a golden ticket to election victory. But in fact, tax cuts tend to deliver only modest political benefits – and sometimes none at all.

Consider a notable case in point: the Revenue Act of 1948. This law provided for the third biggest tax cut in American history[3] (when measured as a share of GDP); that makes it a much, much bigger cut than anything under consideration this year.

But despite its generosity, the 1948 tax cut didn’t save its Republican champions from a drubbing at the ballot box. In fact, they got slaughtered.

Hungry for Cuts

In the wake of World War II, lawmakers in both parties were eager to reduce the high taxes enacted during the emergency. The Revenue Act of 1945, passed with bipartisan majorities just three months after the end of the war, was a lesson in timely generosity; it ranks second on the roster of large tax cuts enacted in the 20th century.

But Republicans in Congress were determined to keep going, and voters seemed to like the idea. In 1946 the GOP won a resounding victory in the midterm election,[4] having campaigned on a promise to make further cuts. Their win gave them a majority in both houses of Congress for the first time in 15 years.

Flush with victory, Republican leaders began drafting a second round of major tax cuts. President Truman, however, had other ideas. Staking out a claim to fiscal responsibility, he resisted the GOP tax cut at every turn. In fact, he vetoed several versions of it before Republicans managed to find the votes for an override.

As they headed into the 1948 election, Republicans were feeling optimistic. Truman, who was heading the Democratic ticket, was notably unpopular, and the GOP had just delivered to voters a much-appreciated break from their heavy wartime tax burdens. (The tax reduction actually polled quite well in the months leading up to the election.)

GOP Defeat

A smiling former President Harry S. Truman (left) holds a copy of the famous Chicago Daily Tribune paper declaring "Dewey Defeats Truman". The others in the photo are unknown, and the event is unknown; but the photo is good clear quality. This was post-presidential.

A smiling former President Harry S. Truman (left) holds a copy of the famous Chicago Daily Tribune paper declaring "Dewey Defeats Truman". 

While voters seemed to like the tax cut, however, they didn’t seem to care very much for the party that gave it to them. Not only did Truman win reelection in 1948, but Republicans lost 75 seats in the House and nine in the Senate, demolishing their cherished majorities.

Two factors can explain the GOP defeat. First, voters were enthusiastic about additional tax cuts, but they wanted future reductions to be more progressive than the 1948 law. Also, in these early years of the Cold War, voters were inclined to support more spending on military aid and public diplomacy. Polls suggested that many people were willing to pay higher taxes to pay for these important spending priorities.

Ultimately, then, the 1948 tax cut was popular – just not popular enough to save Republicans from the limits of their own agenda. On a range of issues, voter preferences were better aligned with Democrats than Republicans.

Also, the nature of the 1948 tax cut really did seem to make a difference. The law became more progressive as it made its way through the legislative process, but voters remained dubious about its fairness. Their suspicion was probably rooted in the less-progressive nature of the initial GOP draft legislation, as well as Truman’s repeated complaints about the law’s distributional inequities.

All told, the Revenue Act of 1948 and its electoral fallout tells us three things about the politics of tax reduction, all of them relevant to this year’s debate.

First, tax cuts are important to voters, but not necessarily more important than other issues.

Second, not all tax cuts are created equal; distributional issues matter, and voters care about who stands to win big in any tax revision.

And third: When it comes to tax legislation, something may be better than nothing – but it’s not always enough.


[1] https://www.reuters.com/article/us-usa-tax-poll/nearly-half-of-americans-oppose-republican-tax-bill-reuters-ipsos-poll-idUSKBN1DT3BX

[2] https://fivethirtyeight.com/features/the-gop-tax-cuts-are-even-more-unpopular-than-past-tax-hikes/

[3] http://www.crfb.org/blogs/president-trumps-tax-cut-largest-history-yet

[4] http://www.taxhistory.org/thp/readings.nsf/ArtWeb/A5D6660DCA2B62D98525730800064E65?OpenDocument

Read Comments (1)

Mike55Nov 30, 2017

I agree with each point, though I think you need a #2a: voter-friendly distribution tables only matter if the voters understand them.

In this case Republicans have crafted a tax cut that is distribution neutral on a static, pre-transfer basis.* Yet the blatant cherry picking of data and truncating of graphs by Democrats has proven remarkably effective, so most voters think the tax cuts are heavily weighted towards the rich.**

It's kinda funny: this is not a great tax bill overall, but inexplicably the single biggest issue most people have with it just so happens to be the one thing the bill does best. There's probably some broader insight to be gleaned from all this, but I'm not clever enough to figure out what it might be (beyond that politics can often be weird).

*Which is of course a silly way to look at things in the first place.

**Or, as you now often hear, a "give-away to the Republican donor class." I'm not positive what that means but, judging from the typical usage context, it seems to be another way of describing a tax cut heavily weighted to the rich.

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