Voters who disapprove of the Republicans’ tax cut are not being contrarians or hyper-partisans. They have every reason to believe the tax cut doesn’t solve their underlying economic predicament. Bloomberg reports:
Real wages have remained mostly stagnant despite an expanding economy, record stock prices, soaring corporate profits and a giant deficit-fueled stimulus from Trump’s tax cuts that took effect Jan. 1. The Trump administration claimed its policies would immediately boost wages, with its tax overhaul ultimately increasing average pay by $4,000 to $9,000.
That hasn’t happened. And though Trump regularly boasts of the economy’s performance, many Americans don’t feel they’re sharing in the gains — a risk for Republicans as they seek to defend their House and Senate majorities in November elections.
In this regard, President Trump is performing far worse than President Barack Obama did — and if his trade wars don’t end quickly, he will do even worse.
Inflation-adjusted hourly wages dropped 0.2 percent in July from a year earlier, their worst reading since 2012, according to the Labor Department, amid faster price gains. They’ve grown at an average 0.3 percent annual pace under Trump overall, compared with 1.1 percent during Barack Obama’s second term. Trump’s escalating tariff disputes risk eroding buying power further by driving up prices.
And of course there are both winners and losers under the GOP tax plan. Because of the change in the state and local tax deduction, more blue-state taxpayers see a reduced benefit or even a hike. “In states where state and local taxes are a higher percentage of state income, the individual income tax cuts will be lower than average and the percentage of taxpayers in each income group with a tax increase will be higher than average for taxpayers in upper income-groups, particularly for the top 1 percent of the income distribution,” says the Tax Policy Center.
One can as a matter of policy favor the limitation on the state and local tax deduction, but as a political matter it works against Republicans in key states. Considering that there are six GOP seats in California, four in New Jersey and two in New York (all high-tax states) that are in the toss-up or worse category according to the Cook Political Report, you can understand why Republicans have not been running on the tax cut plan in many races.
For now, the task for Democrats is easy. They can run on a tried-and-true theme: The GOP gave big tax cuts to the rich and to corporations, promised a huge boost in everyone’s wages and did not deliver. When you get to the 2020 presidential race (which may start the day after the midterm elections in November), the task is harder. Democrats are looking to address growing income inequality (of which wage stagnation is a significant factor) both regionally and up and down the economic ladder. However, they also want to keep the economic recovery going, keep foreign investment in the United States growing (ending the trade wars which deprives foreign countries of dollars to reinvest in the U.S. economy would be a good start), have enough revenue to spend on worthwhile endeavors (e.g., health care, improved worker training, infrastructure). In that effort they should keep in mind a few lessons of the 2016 plan: Don’t over-promise, don’t rely entirely on the tax code to address an array of economic and social issues and lowering corporate rates without closing loopholes will generate a significant political backlash. No one said this was easy, but thanks to the GOP hype, for now Democrats can rightly claim Trump and Republicans pulled a bait and switch on the voters.