Despising taxes is a quintessential American attitude, and one we come by honestly. The American Revolution was fueled in part by a rowdy tax protest known as the Boston Tea Party. Two centuries later, antipathy to high taxes spurred the Reagan Revolution. The Republican Party, recast in Ronald Reagan’s image, still holds a tenet of faith that Americans feel overburdened, overtaxed, and underserved by government. Midway through his presidency, after having lowered tax rates and won re-election in a landslide, Reagan explained it succinctly.
“My friends,” he said, “history is clear: Lower tax rates mean greater freedom, and whenever we lower the tax rates, our nation is better off.”
If true, Americans will soon be much better off: Donald Trump and the 115th Congress just lowered taxes a lot, effective January 1. Although the effects of the Republican tax plan on the U.S. economy will take years to determine, we won’t have to wait long to see how it plays out politically. This is the grand social science experiment of 2018 — and each side thinks it holds the tactical high ground.
“Republicans are going to wear this around their necks,” said Jon Vogel, a former executive director of the Democratic Congressional Campaign Committee. “It allows us to talk about a very real pocketbook issue for voters.”
Good luck with that approach, countered National Republican Congressional Committee spokesman Matt Gorman: “Next year, when paycheck withholdings [decrease] and people start to feel the effects, I dare Nancy Pelosi and Democrats to run on protecting the old tax code and raising taxes on the middle class.”
Republicans should hold the upper hand in this argument. Tens of millions of working-class people are about to see more money in their take-home pay every week, beginning in January or February. It all starts with the new threshold for paying income taxes, which nearly doubles. The “standard” deduction for taxpayers who don’t itemize rises from $6,350 to $12,000. For married filers, it goes from $12,700 to $24,000.
The new law also repeals the penalty on taxpayers without health insurance and doubles the child tax credit, making the first $1,400 refundable — and increases the eligibility to almost all families. It doubles the amount those in the lowest (10 percent) bracket can earn before paying any taxes, and lowers the rate in the remaining six brackets, which especially helps lower middle-class workers. Currently, their lowest bracket is 15 percent, which starts at $18,650 of earned family income. Those Americans will now fall into a much-expanded 12 percent rate that extends to nearly $80,000 in adjusted gross income. An average family earning $75,000 will see their federal tax burden cut in half.As a gift to hard-working (and hard-living) Americans, the legislation reduces the federal taxes on wine, beer,and liquor. So how can Democrats respond to all this good news? They’ve opted for what might be called the “Duck Soup” approach.
In the 1933 Marx Brothers film of that name, Chico Marx — impersonating Groucho Marx’s character — infiltrates the boudoir of a wealthy widow named Gloria Teasdale. When Mrs. Teasdale tells him she saw him leave “with my own eyes,” Chico famously rejoins, “Well, who you gonna believe? Me, or your own eyes?”
The question heading into a midterm election year is whether voters will believe the Democrats’ characterization of this tax cut — or their own paychecks? Control of Congress may hinge on the answer, along with President Trump’s future. For now, at least, momentum is with the Democrats. A Monmouth University poll released Monday showed that 47 percent of those surveyed disapproved of the GOP legislation, while only 26 favored it. In a Gallup Poll released Thursday, things were worse for the Republicans, with 55 percent opposing.
What accounts for such widespread nonchalance to paying less in taxes? It seems un-American. One reason is the current mistrust of Republicans as a whole, and the current Oval Office occupant, in particular. Donald Trump is a polarizing president in polarized times. If he favors something, about half the populace is against it. This same dynamic was present when George W. Bush wanted to partially privatize Social Security and when Barack Obama designed to expand medical coverage to millions of Americans. These ideas polled well — until the president’s name was attached to it. That’s just reflective of our hyper-partisan environment.
Still, there are legitimate reasons to question this legislation. Here are two: First, it slashes the corporate income tax rate from 35 percent to 21 percent without requiring anything from business. Second, even if these cuts spur productivity, as conservatives insist they will, they will likely add significantly to the nation’s federal debt.
In the main, however, that’s not how Democrats have attacked it. Instead, they’ve resorted to florid class-warfare tropes — a giveaway to the rich. Pelosi termed it “Armageddon,” while Bernie Sanders called it “one of the great robberies … in the modern history of this country.” Elizabeth Warren described it as a “gut punch … to hard-working people.”
All this because of a drop in the corporate tax rate that many Democrats favor, and a 2.6 percent drop in the top marginal tax rate? If it’s so bad, why have Democratic senators felt the need to peddle a bogus statistic claiming that a family of four making $81,000 a year would see their taxes increased by $794? Actually, those families would see a significant tax decrease, as would 80 percent of U.S. taxpayers. This particular prevarication earned the Democrats the Washington Post fact-checker’s worst score.
But how does one fact-check “Armageddon”? The answer is that most news organizations didn’t even try, which is another reason the public is so skeptical of this bill. Much of the mainstream media simply allied itself with the Democrats. Not content to savage the tax bill with Democratic Party talking points, the New York Times editorial board even took to Twitter to encourage readers to call seven specific senators and urge them to vote no. This is not journalism; it’s lobbying.
In this environment, Paul Ryan’s pronouncement that Christmas had “come early” for taxpayers struck many Americans as parody. But perhaps, as in the movie “Duck Soup,” those trying to get the mythical nation “Freedonia” into the black will get the last laugh.
While assailing the tax plan in a Wednesday floor speech, Senate Democratic Leader Chuck Schumer singled out AT&T as a company that won’t use the tax break conferred on it to raise pay or invest in new employees. Its track record, Schumer said, illustrates the emptiness of the GOP’s “trickle-down bunk.”
The joke was on Schumer. Hours later, AT&T Chairman Randall Stephenson announced $1,000 bonuses to some 200,000 “union-represented, non-management and front-line managers.” He also touted a $1 billion investment in U.S. operations, citing the GOP tax plan as the reason.
Later that day, Boeing announced $300 million investments in employee programs, Wells Fargo said it was raising its minimum wage to $15 an hour, and Comcast promised $1,000 bonuses to 100,000 non-executive employees. Are these isolated examples, as some evidence suggests? If so, it will be Armageddon, all right — for Paul Ryan, who will be turning over his gavel to Pelosi a year from now. But if this foresighted corporate behavior becomes the norm, it might very well be a Merry Christmas for Americans — and a Happy New Year for the Republican Party.
Carl M. Cannon is executive editor and Washington Bureau chief of RealClearPolitics.