President Trump wants more tax cuts. And for once, I agree with him!
In a Fox News interview that aired Sunday morning, Trump touted his one and only major legislative achievement — his deficit-funded $1.9 trillion tax cut — and expressed great enthusiasm for slashing taxes further.
“We’re doing a phase two,” he said. “We’ll be doing it probably in October, maybe a little sooner than that.”
He was vague about what “phase two” would contain, beyond shaving off another percentage point from the corporate rate. Without explaining how, Trump declared that “the rest” of his tax cuts “would go right to the middle class.”
In any case, calling for another round of tax cuts may seem a bit puzzling.
Trump’s “phase one,” after all, has been a huge dud among voters. Its approval rating has been stuck around 36 percent since April, according to a rolling average of polls aggregated by RealClearPolitics.
Even fewer Americans — 20 percent — believe that they personally benefited from the tax cut, according to the most recent YouGov data. This is despite the fact that most Americans will indeed get at least some reduction in their taxes in 2018. What happens after 2025, however, when nearly all the individual provisions sunset, is a different story; extending these provisions may be what Trump now has in mind, given other comments by House Republicans.
Republicans love to blame the “Fake News” media for supposedly brainwashing Americans into believing their taxes haven’t fallen. But the real issue is the typical household’s tax cut is too modest to be noticed — especially since it’s being doled out in dribs and drabs over the course of the year through lower paycheck withholding.
The average household’s federal income tax withholding is currently about $50 per month lower than it was in the last quarter of 2017, as Evercore ISI’s policy economist Ernie Tedeschi pointed out. That $50 gets overwhelmed by the many other variables that affect take-home pay month to month.
The fact that most Americans overlooked their slightly higher paychecks shouldn’t be surprising. Presidents George W. Bush and Barack Obama both dramatically slashed taxes, too, in plans that were much more generous to the middle class than Trump’s was. Yet when Americans were surveyed after the Bush and Obama cuts passed, almost nobody realized their taxes had fallen then, either.
Recognizing their one and only major legislative achievement is politically useless, today’s GOP has pulled ads about the law. Even Trump can’t stay on message. At events billed as celebrating the tax law, Trump has declared the topic “boring” and moved on to sexier issues such as illegal immigration.
Despite all this, there’s one set of taxes Trump would be wise to start slashing, at least if he really wants to help the middle class: all those idiotic new taxes he himself imposed in the last six months.
By which I mean his tariffs on steel, aluminum, washing machines, solar panels, semiconductors, plastics and about 1,000 other intermediate, capital equipment and consumer goods.
Yes, Mr. President. Sorry to be the bearer of bad news, but tariffs are taxes!
Regardless of who pays them statutorily, the costs of tariffs are passed down the supply chain, with middle-class consumers ultimately footing at least part of the bill. So when Trump threatens a 25 percent import tax on autos and auto parts for dubious “national security” reasons, that’s going to raise the price of cars that American consumers purchase by thousands of dollars. The costs of an all-out trade war would more than offset whatever benefits Americans might get from Trump’s income-tax cuts.
Curiously, this fact seems to have escaped Trump’s notice. In one breath he might celebrate his (imagined) role as the biggest tax cutter of all time; in the next, he’ll tout the $250 billion of new taxes he plans to levy on Chinese goods. Which will be largely borne by U.S. businesses and households.
Instead of doubling back on his misbegotten import taxes, Trump wants Congress to give him even more power to raise import duties, as laid out in a leaked draft of his “United States Fair and Reciprocal Tariff Act.”
Yes, you read that right. The White House is proposing legislation that literally abbreviates to the “U.S. FART Act.” The bill would effectively allow Trump to hike U.S. tariffs whenever he likes, including without congressional consent and in defiance of World Trade Organization rules.
I wonder who came up with that stinker.