History suggests the GOP tax reform celebration will be short-lived

by Patrick Murray

Bookmark that photo of Republican lawmakers gathering at the White House today to celebrate their first major legislative victory of the Trump era. If history is any guide, many of them may be on their way out this time next year.

As others have documented, including Harry Enten at 538, the just-passed tax reform bill starts out life as the least popular tax legislation going back to at least 1981. Tax HIKES in 1990 and 1993 got better reviews. For the record, the Monmouth University Poll puts public opinion of the current package at 26% approve and 47% disapprove.

Polling shows that the public feels the package was mainly designed to benefit the wealthy rather than the middle class. Republicans, and Pres. Trump in particular, currently suffer a credibility deficit with the middle class. Based on Trump’s rhetoric that he would put average Americans first, fully 66% of the public believed when he took office that the middle class would benefit from a Trump administration. That opinion has flipped. Currently, a majority of 53% say that middle class families have seen no benefit at all from the president’s policies to date.

Importantly, fully half of the American public believes that their own federal taxes will increase because of this new tax reform package. Only 14% expect that their taxes will go down. In reality, many more than 1-in-7 taxpayers will see at least a nominal decrease. This reality is what GOP lawmakers are banking on when they face the voters next year.

But politics – and voters’ decision-making process – isn’t always based on reality. It is, however, always based on perception. And based on historical perception metrics, the short-term future doesn’t look quite so bright for the bill’s proponents.

Even though voters won’t feel the full impact of this tax cut until they file their returns in early 2019, they should get a small increase in their net take-home pay when the IRS adjusts the withholding tables in the next few months. Will this be enough to turn around public opinion? History says no.

For example, the 2009 stimulus package included tax cuts for nearly all taxpayers that was reflected in an increase in net take-home pay. Most Americans didn’t notice. A University of Maryland/Knowledge Networks survey conducted in November 2010 found that a majority of the public (52%) did not think the stimulus bill included any tax cuts at all. In fact, 39% said their own federal income taxes had gone up and 48% said they hadn’t changed. Just 9% said their taxes had gone down – a perception that was far from the “reality” of nearly 95% of Americans whose taxes were decreased.

The Tax Policy Center estimates that the mid-point increase in net income for the current package will be about 1.6%. My rough back of envelope calculations suggest that this might amount to anywhere from $25 to $50 extra in the biweekly paycheck of someone earning $60,000. I’m not convinced this amount will be perceived as significant by many voters.

Of course, the IRS could always release new payroll tables that significantly under-withhold federal taxes. This would mean taxpayers end up owing money to DC when they file their 2018 returns – but that would happen months after the midterm elections. Barring that type of manipulation, though, the net increase is unlikely to be seen as significant if at all.

In the end, we have a tax package that starts out in a very deep negative public opinion hole. Couple this with the prospect that the net take-home pay impact is likely to be perceived as immaterial. It does not look very likely that public opinion on this legislation will turn around in the next 10 months or so.

P.S. The 12 House Republicans who voted against the tax bill should not get too confident that they’ve inoculated themselves from any fallout in the upcoming midterms. In 2010, the ACA was the hot button issue and nearly three dozen Democrats decided to buck their party and vote against it. Of the 30 who ran for reelection that year, 17 lost. By 2013, only 6 of the original 34 Democratic nay votes remained in the House.