Why the Republicans' Tax Cut Won't Save Them from Political Disaster

(AP Photo/Andrew Harnik)

Republican Congress members applaud as Senator Orrin Hatch signs the final version of the GOP tax bill during an enrollment ceremony at the Capitol on December 21, 2017.

Donald Trump lies so often that when he tells unadorned truths it can be a shock. But sometimes it happens when he forgets to spin, as it was when he was speaking to a group of wealthy friends at a dinner at Mar-a-Lago last Friday. "You all just got a lot richer," he told to the well-heeled diners, referring to the tax cuts he had just signed.

And they certainly did, despite the endless assurances that the bill was really aimed at the struggling middle class. That's particularly true if Trump's guests own lots of stock, because the bill's centerpiece, the cut in the corporate tax rate, will in all likelihood be mostly passed on to shareholders, in the form of dividends and share price-boosting efforts like stock buybacks.

Republicans in Washington, however, are holding out hope that before long, the American middle class will understand how the tax bill has transformed their lives, then reward the GOP accordingly. Once the inevitable tide of prosperity washes across the land, voters enjoying their newfound wealth and happiness will flock to the polls to pull the lever for Republican candidates.

So will that actually happen? Or to put it in terms closer to reality, is this first (and perhaps last) significant accomplishment of the Trump presidency going to save their party from electoral disaster in 2018?

Anything's possible, but the chances are slim.

Let's be clear about one thing to begin: Initially, the bill does indeed give a cut to most taxpayers. Most of those individual cuts phase out over time, so that by 2027 over half of taxpayers will actually see their taxes go up, but most people will see a cut at first. The problem is that the bill is so complex that it's nearly impossible for the average person to figure out whether they're getting a cut or not, which will limit the degree to which people will feel like they've been given a gift. Soon it will show up in people's paychecks, but that won't be dramatic—if your taxes are being cut by $1,000, you'll be getting an extra $19.23 in your weekly pay. Which is better than nothing, but it isn't exactly life-transforming. And since most American workers are paid by direct deposit, they may not even notice.

That's what happened when Barack Obama and the Democrats cut taxes for 95 percent of Americans as part of the 2009 stimulus: Because it came in the form of lower withholding, nobody noticed it. One poll in 2010 found only 12 percent of people realized they had gotten a tax cut, while 24 percent mistakenly believed Obama had raised their taxes.  

As of now, the GOP tax bill is one of the least popular pieces of legislation in history, and Americans are convinced that it mostly helps the wealthy and corporations at the expense of the middle class. If you believe what Republicans say, that's not too much of a problem, because the bill will cause the economy to erupt in a volcanic burst of growth that will naturally benefit the party in power. The problem there is that their fundamental theory about taxes—if you raise them the economy quickly spirals into recession, and if you cut them the economy undergoes an immediate and breathtaking surge—has been proven wrong again and again.

So while the economy may be perfectly fine when next November rolls around, it's unlikely to be experiencing the explosion of growth they've predicted. And the fundamental problems that have been causing such discontent—slow wage growth, lack of benefits, job insecurity, increasing inequality—aren't going to be helped by this bill.

Add to that the fact that the leader of the Republican Party is incredibly unpopular, and the persuasion job becomes all the harder. Meanwhile, Republicans seem to be trying to validate every criticism Democrats make of them. Paul Ryan is eager to follow up the tax bill with an assault on the safety net, including Medicare, Medicaid, and Social Security. Having seen what happened when Republicans tried to undermine Medicaid as part of their effort to repeal the Affordable Care Act, Democrats would be only too happy to see him try. They're already using the obvious message—"Republicans cut taxes for the wealthy and now want to pay for it by taking away the programs you rely on!"—and the GOP doesn't seem to have a persuasive answer, mostly because the criticism is true.

Nevertheless, Republicans believe that even if the tax bill isn't popular, passing it is far superior to the alternative of passing nothing. If they didn't show they can get something done, their base would be disgusted and stay home in 2018.

Which is possible. But it ignores the most important factor in next year's elections: Democrats. What makes the biggest difference in a midterm election is how mad the opposition's voters are, and Democrats are plenty mad. That's why they've been organizing and running for office and turning out in surprising numbers since Trump got elected. That's why there's a Democrat headed to the U.S. Senate from Alabama, and why they won spectacular victories in Virginia, and why they've outperformed their usual numbers in nearly every special election, even when they've fallen short of a victory.

And this tax bill is just going to make them more mad. The partisan way it was passed, the absurd lies with which it was offered, the way the benefits are distributed—all will make it a rallying cry for an opposition party with no lack of motivations for its voters to get to the polls in 2018.

The long-term effects of the Republican tax bill are likely to be enormous, particularly the way it will starve the government of needed revenue and exacerbate economic inequality. In the short run, the political effects could be large as well—and they're likely to be the opposite of what the Republicans who pushed it through are hoping. Perhaps none of it will matter once corporate tax cuts deliver us all to a future of limitless prosperity. But in the event that doesn't happen, Republicans are still going to be in big trouble next year, even if they got the tax cut they wanted.

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