Nonprofit, nonpartisan journalism. Supported by readers.

Donate
Topics

As Republicans celebrate their win on the tax bill, Democrats wonder: Is this the GOP’s Obamacare moment?

Republicans have been talking about changing the tax code for years. Now that they’ve done it, how will voters react?

Republicans celebrated the passage of a sweeping bill to change the U.S. tax code, making good on years-old promises to lower taxes for corporations and individuals.
REUTERS/Jonathan Ernst

When Democrats passed the Patient Protection and Affordable Care Act in March 2010, they celebrated it at the White House as a landmark legislative achievement — an overhaul to the U.S. health care system that aimed to make it easier and more affordable for more people to access medical care.

Achieving that goal was a key campaign promise for President Barack Obama and Democrats.  But they got punished for delivering on it during the next midterm elections: Republicans, running on a vehemently anti-Obamacare platform, picked up a staggering 63 seats in the U.S. House, recapturing control of the lower chamber.

This week, Republicans celebrated the passage of a sweeping bill to change the U.S. tax code, making good on years-old promises to lower taxes for corporations and individuals. As they advanced the legislation through Congress on party-line votes, the bill was polling abysmally: one NBC/Wall Street Journal poll found only 24 percent of Americans believe the GOP tax plan is a good idea.

How decisive an issue the tax bill is for 2018 — and for control of Congress — will hinge on how quickly voters feel the effects of the legislation and how they believe it will affect them in the future. Democrats hope that the Tax Cuts and Jobs Act will be an electoral albatross for the GOP in 2018, like Obamacare was in 2010 for them, delivering them back control of the House.

Article continues after advertisement

But with a little over 10 months to go until Election Day 2018, Republicans are betting that the way they’ve engineered the bill — with many people slated to enjoy at least some tax cuts as soon as next spring — will help insulate them from Democrats’ doom-and-gloom scenarios and help preserve their majority.

Tax withholding an immediate impact

The Republican tax bill has many moving parts and makes significant changes to how taxation in the U.S. works, reworking everything from how much corporations pay and where their income is taxed to how much taxpayers can deduct from expenditures on student loan interest, mortgage interest, and state and local taxes.

Promising a “flatter and fairer” tax code that you could file on a postcard, the GOP lowered rates for individuals and corporations, but kept the number of tax brackets the same while adjusting their thresholds.

All these changes to rates and deductions won’t hit taxpayers until the first months of 2019, when they begin filing their taxes for 2018. “I don’t think people are going to wake up on January 1 and see that their lives have changed in a huge way,” Eric Toder of the Tax Policy Center, a think tank that has been critical of the GOP tax plan, told Vox.

Nevertheless, Republicans are touting a few ways their legislation could directly and indirectly benefit taxpayers in the coming year, before they file their 2018 taxes.

As early as February, workers may begin to see lower withholding of federal income tax on their paychecks, something 3rd District GOP Rep. Erik Paulsen, who sits on the Ways and Means Committee that wrote the bill, pointed to as an immediate benefit.

“Having more dollars in your check every month starting in the spring is going to be impactful for real people,” he said. The tax plan gives little guidance as to how this process should work, so the Internal Revenue Service has a tight deadline to issue new specific rules, and employers are scrambling to figure out how to comply. The impact is expected to become clearer in January.

In the immediate reaction from corporate America, Republicans saw evidence of a broader ripple effect as corporations responded to the prospect of a drastically lower tax rate on the way.

Sixth District Rep. Tom Emmer pointed out that companies like Comcast and AT&T said they would raise wages and provide bonuses. “In the short term, we’re already seeing it,” Emmer said of the bill’s positive impacts. “It’s going to get better, long-term, it’s good for this country.”

Article continues after advertisement

2019: ‘a bad time’ to realize a tax cut

Tax withholding and temporary bonuses from some corporations are something to consider, but the biggest effects of the sweeping legislation will play out over the course of years, not days or weeks. For example, one of the most significant changes the bill makes, ending Obamacare’s individual mandate, does not take effect until early 2019.

Whatever increase taxpayers see in their after-tax pay when they file their returns will, for most people, be more significant in the short term than the long term. The Tax Policy Center issued a report forecasting that taxpayers will see a 2.2 percent increase, on average, in after-tax income from their 2018 returns. That report also estimates that in 2018, 8 in 10 Americans will pay lower taxes. But gradually, those increases are projected to diminish for most taxpayers until 2027, when temporary individual tax cuts are slated to end, and tax bills could go up if they are not extended.

For Republicans, who have marketed their tax plan as one that will provide much-overdue relief to taxpayers, there will be pressure to explain what they see as the bill’s long-term benefits ahead of the 2018 election, and in the face of Democratic arguments the complicated plan will raise the deficit and slash government services.

If polling is to be believed, voters don’t believe the bill will help them, presenting Republicans with a messaging challenge for the campaign trail. Both Emmer and Paulsen claimed the GOP bill was unpopular not because they were doing a poor job selling it, but because the press was not reporting its contents accurately or fairly.

“People in the media aren’t reporting what’s in the bill,” Paulsen said. “They need to know what’s in the bill.”

Emmer said that the tax overhaul completed by Ronald Reagan in 1986 wasn’t popular initially, either. “Leadership is not leading people to where they already are,” he said. “It’s leading people to where they need to be. Our job now, and with our colleagues in journalism, our job is to put facts out to the American people.”

But Republican operatives are sizing up that job as a challenge. Brad Todd, a GOP consultant, told the Washington Post that “April 2019 will be a bad time for people to realize that Republicans gave them a tax cut… In order for the benefit to not come too late in the election cycle, it’s pretty important for conservative and Republican groups to make the sale now and let people know what’s coming.”

To that end, conservative groups plan on spending hundreds of millions of dollars on messaging campaigns next year touting the tax bill, selling the electorate on how it will help the economy, and blasting Democrats for opposing it.

Democrats see opportunity, GOP sees wishful thinking

Congressional Democrats, none of whom cast a yes vote for the legislation, see the tax bill being as damaging to the Republicans as Obamacare was to them. They plan on countering Republicans’ arguments about the short and long-term effects of the legislation, and believe they will prevail.

Article continues after advertisement

Last week, 8th District DFL Rep. Rick Nolan predicted that the fallout from the tax bill would put the House of Representatives back in Democratic hands; Fifth District DFL Rep. Keith Ellison said Democrats will spend 2018 “making sure everyone knows who it is that hurt our economy.” 

First District DFL. Rep Tim Walz, who is a candidate for governor, told MinnPost that Republicans will have to own their plan — from its initial rollout to what happens with it years later — like the Democrats did with Obamacare. He recalled that when Minnesota’s health insurance exchange, MNsure, had a botched rollout, “people lost elections.”

“They’ve set expectations incredibly high,” Walz said. “There’s going to be glitches, major glitches. There’s going to be a microscope on that… They own it, they did it.”

He doubted that the economy will achieve the rosy economic growth rate Republicans predict — three percent or more in GDP growth as a result of the tax bill — and instead expects the bill will have broader, deeply negative impacts on things like the federal debt, social safety net programs, and health care, which would outweigh any benefits people would see elsewhere.

“More money on your paycheck but losing your health care is not a good deal… more on your paycheck and not being able to write a Farm Bill with safety net programs is not a good deal. You’ll see me out there this summer saying, how’s [the tax bill] working out on your paycheck?”

Republicans, like Emmer, scoffed at the notion that their tax plan will be the albatross for them that the ACA was for Democrats.

“I’d say it’s Democrats who should be very concerned about how this will play in the next election,” said Emmer, who is a top official at the National Republican Campaign Committee, the GOP’s House campaign arm. “In voting against it, you voted in favor of big government and against individual Americans. That’s not a campaign theme. For them to compare the ACA to what we did yesterday is wishful thinking on their part.”

As with many Republicans, Paulsen’s closing argument comes down to this: with this bill, the GOP has finally delivered on what it has promised for a long time. “What we’re buying here is a new tax code and faster growth,” he said. “I expect to be talking about tax reform often. We’ve been talking about it for the last six years.”