Trump’s tax cuts message falls flat on middle class
Corporate rate a hard sell
President Trump’s team is working overtime to convince Americans that the Republican tax reform plans, which tilt decidedly toward lowering rates for businesses, will be a boon for middle-class families.
The message for the most part has failed to take hold outside Republican conference rooms on Capitol Hill. Even some hard-core Trump supporters aren’t buying it.
“Maybe Republicans aren’t making that case strong enough,” Heritage Foundation tax policy analyst Stephen Moore told The Washington Times.
“A business tax cut is a middle-class tax cut,” he said. “The whole reason we want to cut the business taxes is to benefit workers so that there are more jobs, higher wages, more companies come back to the United States. It’s all about making the American economy more competitive, which benefits the
Mr. Moore helped write Mr. Trump’s tax plan during the presidential campaign. The original proposal included a deeper cut to the corporate rate and bigger reductions across tax brackets for individuals. Those cuts added up to about $3 trillion in lost revenue and needed to be trimmed and reshaped to fit into the $1.5 trillion hole congressional Republicans allowed in the budget.
Mr. Trump originally proposed reducing the corporate rate from 35 percent to 15 percent. He insisted that the House and Senate give him at least a 20 percent rate.
As a result, the House Republican bill gave more than 70 percent of the $1.4 trillion in tax cuts to business and the Senate Republican bill gave nearly 60 percent, according to an analysis by The Times.
The business tax cuts include the 20 percent rate for corporations and a cut in the rate paid by small businesses that file through the individual side of the tax code.
Republicans say those business tax cuts will end up helping average Americans too.
A typical family with an income of about $60,000 would get a tax cut of $1,182 under the House bill, Republicans said. But adding in higher wages from an economy supercharged by lower taxes and reaching 3.5 percent growth, an average middle-income household would get an extra $1,400, raising their after-tax income by nearly $2,600.
“I always viewed the business tax cut as the heart and soul of this plan,” Mr. Moore said.
Regardless, corporate rate cuts are not popular among voters. Just 35 percent of American voters who have seen, read or heard about the tax plan support cutting the corporate tax rate, according to a Morning Consult/Politico poll.
A Reuters/Ipsos poll found that only 8 percent of Americans believe the tax reforms will benefit the middle class. About 32 percent said the wealthy will benefit the most and 14 percent said U.S. corporations will benefit the most, according to the poll.
Mr. Trump signaled Monday that he wanted bigger tax cuts on the individual side. In a tweet while traveling in Asia, he suggested adding a repeal of the Obamacare mandate to buy health insurance in the tax reform bill to pay for more cuts.
The Congressional Budget Office estimated that eliminating the mandate would provide about $338 billion in savings over 10 years, which Republicans could use to lower tax rates further.
“Cut top rate to 35% w/all of the rest going to middle income cuts?” the president wrote on Twitter.
Some of the resistance to the tax plan is from middle-class Americans who fear they will end up paying more because of the elimination of popular income tax deductions such as the one for state and local taxes.
“I hate the tax plan,” said Sue Payne, a conservative activist and Trump supporter in Maryland, a high-tax blue state where residents could feel the pinch if they lose the deduction.
“It’s really going to kill people like me. This is bad for the middle class,” she said. “The Republicans are wrong on this, absolutely wrong on this. And for the first time in my life that I can remember, I’m agreeing with Democrats.”
She didn’t blame Mr. Trump. She blamed his advisers and Republican lawmakers.
The White House and Republican leaders argue that the nearly doubling of the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly will help offset the loss of popular deductions.
Proponents of nixing the deduction for state and local taxes say the system subsidizes high-tax states such as California, New York and New Jersey. Eliminating these deductions would force those states to cut taxes, they say.
As a compromise to shore up support from blue-state Republicans, the House bill kept a deduction for local property taxes up to $10,000.
Senate Republicans completely eliminated state and local tax deductions.
Mr. Trump’s daughter and senior adviser Ivanka Trump sided with the House Republicans’ compromise, providing a strong indication of where the White House comes down in the dispute.
“House Ways and Means solved that problem in a creative way in allowing property taxes to be deducted. The Senate is still not there,” Ms. Trump said on Fox News’ “Fox & Friends.”
She is part of a team of administration officials dubbed the “Tax Cabinet,” which has been touring the country to drum up support for the reforms.
“The purpose of tax reform is to provide middle-income tax relief and to enable our businesses to grow and our economy to grow,” she said.
Ms. Trump visited Maine for a forum Friday with Sen. Susan M. Collins, a moderate Republican who has resisted Mr. Trump’s agenda and helped defeat the repeal of Obamacare.
Ms. Trump said it was a “good start” that Ms. Collins had the same goals as the president for tax reform.
“She wants to create growth. She wants to create prosperity. She recognizes that cutting corporate taxes is going to give employers the impetus to hire more workers and it is going to create wage growth, which is what this country desperately needs and has not had in a very long period of time,” said Ms. Trump.