After three debates and more than 100 stump speeches, George W. Bush
still hasn’t been able to kindle much voter passion for his tax-cut
plan. He wants to refund taxpayers a record $1.3 trillion over 10 years,
yet polls show most of them don’t want it. Keep it, they say, pay down
the debt and shore up Social Security. Huh? Since when have taxpayers
turned down a tax cut, especially the biggest one in U.S. history?
Since they stopped needing one — at least not as badly as they did
when they gave Ronald Reagan a mandate to broadly slash their tax rates.
Two decades ago, workers suffered from “bracket creep,” meaning
double-digit inflation bumped them up into higher tax brackets. So even
as they were earning less in real income, they were paying more in
taxes. Their bosses also were squeezed. Small business owners filing IRS
1040s and subject to the top personal income-tax rate, had to fork over
a whopping 70 cents of each additional dollar they made. Meanwhile, the
economy was plumbing the depths of a sharp recession. If that weren’t
bad enough, some politicians threatened to raise taxes to close
yawning gaps in the federal budget.
No wonder 62 percent of Americans surveyed by Gallup Poll in 1979
agreed that Washington “ought to cut taxes.”
But the complexion of the economy and the budget — as well as the
IRS code — has changed dramatically since then. And along with it,
attitudes toward taxes (although, personally, I think any time is a good
time to cut taxes).
Inflation is relatively benign, and few workers complain about
bracket creep anymore. Also, investors don’t have to worry as much about
paying taxes on artificially inflated gains from stock sales.
In an era of deficits, moreover, people assumed their taxes would
have to go up in the future. But in a time of surpluses, people don’t
expect higher taxes. And that’s reflected in recent spending and saving
patterns. As surpluses soared to a record high last year, the personal
savings rate plunged to an all-time low as consumers banked on no new
taxes. In fact the savings rate hit zero at the same time the budget
came into balance in 1997.
With Washington swimming in excess cash now, politicians are loath to
even suggest raising taxes.
So voters may be viewing surpluses as a proxy tax cut.
Of course, Republicans argue that such contentment doesn’t square
with the high federal tax burden, if you measure it in tax receipts as a
share of the economy. They never tire of pointing out that the federal
tax bite now is bigger — at more than 20 percent of national income —
than it was two decades ago.
But this has more to do with higher federal revenues from the booming
economy and Dow than it does from higher tax rates.
Fact is, Reagan chopped the top marginal income-tax rate down to 28
percent from 70 percent. Though President Clinton and Vice President
Gore, who cast the tie-breaking 1993 budget vote, ramped the top rate up
to 39.6 percent (42.5 percent if you include the Medicare tax), tax
rates are still far below the levels of two decades ago.
Recent polls show that Americans, as a result, are far more passive
about taxes in this election cycle.
Last year, Gallup asked the same question about cutting taxes and
only 21 percent agreed they ought to be cut. And in a USA Today/Gallup
Poll conducted in early October, tax cuts ranked below Medicare, the
debt, education and Social Security, in that order, as a top priority
for likely voters. Only 11% say the surplus should be refunded to
taxpayers.
Bush’s tax advisers argue that if he’s having a hard time selling his
tax-cut plan, it’s only because the
media keep parroting Gore’s tax-cuts-for-the-rich rhetoric, even though
all taxpayers would get relief.
“The vast majority of the national press corps is dead-set against an
across-the-board tax cut,” Hoover Institution economist John Cogan said.
“It’s hard to get through that filter.”
The plan’s complexity is another hurdle, says Hoover economist Martin
Anderson, another Bush tax adviser. “If there’s any difficulty with the
Bush proposal,” he said, “it’s that it’s not easy to explain.”
The Bush plan mixes cuts in marginal tax rates with tax credits and,
as such, isn’t as simple as the sweeping 15 percent rate cut proposed by
Bob Dole four years ago, a plan that could be packaged in the space of a
button. But despite the “15%” pins, Dole couldn’t sell his plan, either.
And don’t forget Steve Forbes’ flat-tax promise — you can’t get any
simpler than a post card. Yet it went nowhere.
Polls show voters understand the basic features of the Bush tax-cut
plan, at least in contrast to the Gore plan. The message has gotten
through. Problem is, voters just aren’t buying it.
In devising his tax cut, Bush and his advisers failed to see the
changing political landscape and mistakenly banked on more of the
anti-tax militancy that Reagan successfully tapped into 20 years ago. If
Bush wins, it clearly won’t be on tax cuts alone, although he’ll not
doubt declare his victory as a mandate for tax cuts. If he loses,
Republicans might want to stick a fork in the overcooked notion that tax
cuts can get them elected these days.
How’d Trump do it? Here’s his secret weapon
Wayne Allyn Root