Tax cuts are no longer a winning strategy for President Trump in 2020, according to new Brookings research.
“In recent days, the administration’s economic policy declarations have had the substance of a nativist MadLibs and the erraticism of a Plinko game. But wherever the chip lands on tax cuts, it is unlikely to aid Republican electoral chances,” says Brookings Institution’s Vanessa Williamson, in a recent report.
It’s been roughly 20 months since Trump pushed through his signature $1.5 trillion tax cut legislation aimed at jolting the economy. It hasn’t managed to provide the boost promised to Main Street. Wages grew by just 2% when adjusted for inflation, resulting in an additional $28 per worker, according to the nonpartisan Congressional Research Service. Those benefits were slim given that the average corporate tax rate was reduced by as much as 48%. However, the average rate for individuals only fell by 4%.
Corporations were the biggest beneficiaries, with many companies buying back their own shares. S&P 500 companies broke the record set in 2007 by spending $806 billion on stock buybacks last year, up from close to $590 billion a decade prior. (JPMorgan Chase CEO Jamie Dimon defended buybacks earlier this year, saying that though sometimes misused, stock buybacks “are an important tool that businesses must have to reallocate excess capital.”)
Consequently, talk of those tax cuts has turned toxic on the campaign trail for Republicans. Trump tried to revert back to typical Republican Reagan-era campaign promises of tax cuts for the middle class over the past few weeks, but the mixed messages did him no favors. A day after saying he was considering tax cuts such as payroll taxes, Trump reversed his position and denied he had been considering them. More recently, Trump tweeted that one of his first acts should he get re-elected would be to pass a major tax cut for the middle class.
Only 17% of Americans believe their tax bill shrunk as a result of the 2017 Tax Cuts and Jobs Act, according to a recent NBC/Wall Street Journal poll.
“The 2017 Tax Cuts and Jobs Act reduced revenues and increased inequality without spurring growth. It was also a political failure,” says Williamson. The legislation also increased the national debt by $1.8 trillion through 2029, according to the Committee for a Responsible Federal Budget.
While some economists could argue that it’s still too soon to see the full effects of Trump’s tax cuts, voters do have a track record of not noticing tax credits in their pocketbooks.
Williamson points out that President Obama’s 2009 economic stimulus package included a tax credit for low- and middle-income workers, but most didn’t even notice. In fact, only 12% said their taxes went down, according to a 2010 CBS poll. As many as 53% of Americans said taxes stayed the same, and 24% thought they owed more.
Only 1% of Americans rank tax cuts as the most important issue facing the country, according to Gallup. Poor government leadership and immigration rank highest. “Most [Americans] are more concerned that wealthy people and corporations don’t pay their fair share, rather than their own taxes are too high,” says Williamson.
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