Will People Actually Notice a Tax Cut?

 

Will People Actually Notice a Tax Cut?

Blog Post

By No Labels
12/20/2017

Will People Actually Notice a Tax Cut?

Consider two facts.

 

  • The Joint Committee on Taxation reports the current tax bill would offer an average of about $800 in initial tax relief to households making between $40,000 and $100,000, according to Bloomberg.
  • In 2009, an economic stimulus bill reduced taxes by $800 for married couples in 9 out of 10 American households — but polling a year later found that only 12 percent said their taxes decreased.

It creates a fascinating question: As Congress votes on a bill that could cut taxes for millions of Americans, will people even notice their taxes have been cut?

The bill expected to get a final vote today will be largest tax overhaul in 30 years, and how the public perceives it could have a major impact on next year’s election. As lawmakers get set to vote, here’s what you need to know.

People don’t always register tax cuts, thanks to withholding

One reason people don’t always register tax changes is that they are enacted via withholding on paychecks, according to Forbes. “The GOP cut will unfold in baby steps over the course of dozens of paychecks,” the magazine reported. “That sort of piecemeal benefit can be hard to see, or at least to appreciate. Withholding – by nature and design – tends to obscure tax burdens.”

As an example, an $800 tax annual cut would only equate to about $31 in each bi-weekly paycheck.

Polls show people are not expecting taxes to drop.

In a recent Quinnipiac University Poll, 44 percent said they expect their taxes to increase after the new bill is passed and 30 percent said they expected little difference. Only 16 percent expected a tax cut. People were a bit more optimistic in a New York Times survey, but even there only a third said their taxes would fall if the bill is passed.

Polls show taxes are not a major problem for most Americans.

In a Gallup poll in November, only 2 percent cited taxes as the most important problem facing the country. Race relations (10 percent), healthcare (9 percent), immigration (6 percent) — even unifying the country (7 percent) — all scored higher. Dissatisfaction with the government scored highest at 23 percent.

Thus far, the current bill is generally unpopular.

Roughly 26 percent approve of the tax plan while 55 percent disapprove, according to a Quinnipiac University Poll earlier this month. Of course, there are extreme partisan differences. Among Republicans, 66 percent approve versus only 3 percent of Democrats. Among Democrats, 91 percent disapprove versus 11 percent of Republicans. Among independents, who can be crucial in any election, 61 percent disapprove and 20 percent approve.

The bill will almost certainly impact next year’s election.

Next year’s midterm elections will determine control of Congress, where Republicans hold both chambers (narrowly, in the case of the Senate). Like all midterms, the races will largely be a referendum on the ruling party and the administration.

Though sentiment is currently running against the tax overhaul, Republicans still have a year to sell it to voters — and Democrats have a year to criticize it. Perhaps most importantly, the American public and businesses will have a year to see how the next tax regime actually impacts their daily lives and decisions. Which party prevails is still an open question. But one thing is certain: as the signature legislative achievement for the Republican Party and the Trump Administration, the tax bill will be a central issue in the election.

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