- Thomson Reuters
- Republican Sen. John Cornyn’s tweet on Tuesday exemplifies how Republicans have forgotten how to talk about middle-class tax cuts.
- Their bill to overhaul the tax code has become unpopular as a result.
- The bill is expected to become law this week.
Sen. John Cornyn wants you to know the Republican tax plan is great for families because of its treatment of noncorporate business income.
Under #TaxCutsandJobsAct a married couple earning $100,000 per year ($60,000 from wages, $25,000 from their non-corporate business, and $15,000 in business income) will receive a tax cut of $2,603.50, a reduction of nearly 24 percent.
— Senator John Cornyn (@JohnCornyn) December 19, 2017
This is just what Joe and Jane Smith talk about at the neighborhood association meeting: How President Donald Trump is delivering for them by cutting taxes on their noncorporate business income.
The funny thing is, having noncorporate business income is quite common for a middle-income family. Approximately one out of six American income-tax filers use Schedule C, the form you use to report income from a noncorporate business.
Plumbers who work as independent contractors use Schedule C. So do freelance journalists. So do Uber drivers. And the Republican plan will provide an (unwisely designed) tax preference for the kinds of income people report on Schedule C.
What’s uncommon is referring to this income as noncorporate business income. Normal people call this small-business income. Or freelance income.
If you tell Schedule C filers you’re going to cut taxes on “noncorporate businesses,” they may stare at you blankly instead of rushing out to vote for you.
Republicans have failed to communicate the bill’s upsides
- Carlos Barria/Reuters
The Republican tax bill is unpopular, and it deserves to be unpopular. But I’m not sure it deserves to be quite as unpopular as it is, because Republicans have failed to communicate the bill’s upsides effectively.
A New York Times survey found that only 32% of Americans believed the plan would give them a tax cut in 2018; the Tax Policy Center estimates that the true figure is 80%.
Of course, voters’ analysis of the bill’s merits is not based solely on whether it cuts their taxes in year one.
Many people have reasonable concerns about the temporary nature of most of the individual income-tax cuts and the risk they won’t be made permanent. They have concerns about budget deficits, or concerns about how reducing government revenue will affect government programs they care about.
They see the lion’s share of the benefits from the tax cut going to high earners and think that’s unfair. They generally distrust Trump and Republicans to act in their best interests, and they make a reasonable inference that their signature legislation goes against their interests.
Some people even tell pollsters they don’t think they, personally, ought to get a tax cut.
But part of voters’ analysis of the tax bill’s merits is based on voters’ assessment of what it will do for them in year one, and Republicans have failed to communicate effectively the bill’s upsides. They have failed so abjectly that a majority of people who will get a tax cut from the bill in 2018 believe they will not.
These misconceptions have arisen in part because Republicans are laser-focused on what the bill will do to the business sector, and seem to think about individuals only as an afterthought. That’s how they end up saying the bill will help people by taxing them less on their noncorporate business income instead of saying the bill will help freelancers and small-business owners.
I have seen some conservative commentators complaining that the media has been unfair about this bill – in particular by placing too much emphasis on the bill’s effects in 2027, after many of its tax-cut provisions are set to expire, even though future Congresses are likely to extend those provisions (at the cost of even greater budget deficits than are already created by this bill).
And I think that timeline could often have been described more carefully. Rather than calling the bill “a middle-class tax increase,” say that the bill initially cuts taxes on most middle-class people, that those cuts are somewhat eroded over time, and that taxpayers will be depending on future Congresses to reauthorize those cuts or else they will expire, leading to tax increases.
On the other hand, relying on a budget gimmick that requires you write the law so that it’s scheduled to impose tax increases on individuals in 2027 to finance permanent corporate tax cuts opens you to the attack that you are raising taxes on individuals to finance corporate tax cuts.
Republicans were also harmed by their choice to make an extremely unpalatable opening bid.
The original “framework” they circulated this fall would have led to near-term tax increases on many more taxpayers. The cacophony of complaints about that was effective in getting Republicans to revise the bill.
Most members of the public will never follow the legislative machinations closely. If you don’t want voters to come under the impression that you’re raising taxes on much of the middle class, or that you intend to repeal the adoption credit, or that you want to abolish the deduction for student-loan interest, it’s best to never propose those ideas in the first place.
President George W. Bush opened his pitch for his 2001 tax cuts by promising “a tax cut for everyone who pays income taxes.” This was a simple and popular idea, and following the pledge made it impossible to attack him for raising taxes on the middle class, or anyone else.
Trump and Republicans in Congress did not follow that example. It’s going to hurt them.