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March 5, 2018
Why the TCJA Probably Won't Matter in November

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According to recent polls, Americans are warming to the Tax Cuts and Jobs Act (P.L. 115-97). According to a February survey commissioned by The New York Times, more Americans now approve of the law than disapprove of it. That’s a big shift from the end of last year, when most polls found the TCJA to be deeply underwater.

For Republicans, this is obviously good news, vindicating the risk they took in drafting a tax bill that most Americans seemed to dislike. It also bodes well for the party’s fortunes in November, since voters have a well-documented tendency to reward incumbent politicians for fatter paychecks.

Still, the GOP’s November payoff is hardly certain. The problem, as political scientists Christopher H. Achen and Larry M. Bartels explain in their 2016 book Democracy for Realists, is that voters don’t care very much about tax policy — or any other issues, for that matter.

No Sure Thing

In a pair of articles last November, I examined the tax cuts of 1948 and 1981, seeking to gauge their impact on subsequent election results. (Prior analysis: Tax Notes, Nov. 6, 2017, p. 730, and Tax Notes, Nov. 20, 2017, p. 1010.) These were very big tax cuts, ranking first and third in the annals of American tax relief, but neither delivered electoral salvation to its sponsors. That leaves a crucial question unanswered: Why not?

As Achen and Bartels point out, voters tend to be highly responsive to economic conditions, especially rising incomes. Because a tax cut typically results in larger paychecks, voters might reasonably be expected to reward the politicians who supported it.

In fact, the relationship between paychecks and election results is not quite so simple. For one thing, voters are highly myopic in their assessment of economic well-being, focusing heavily on their situation in the last few weeks of an election cycle. “While they vote on the basis of how they feel at the moment, they forget or ignore how they have felt over the course of the incumbents’ term in office,” Achen and Bartels write.

In that sense, it’s far too early to know whether Republicans will see much of a boost from the TCJA by the time November rolls around. Yes, voters may appreciate their heftier paychecks, at least initially. By the time the voting starts, however, the warm glow associated with larger after-tax incomes may well have cooled, especially if other economic trends are complicating the picture.

Ultimately, GOP electoral fortunes in 2018 may depend on how markets, businesses, and the Federal Reserve react to the tax cut. Many elements of the TCJA seem likely to work in favor of Republicans, especially its corporate rate cut and generous depreciation provisions. But surging deficits — and the possible monetary responses to them — may have a countervailing, negative effect on the economy’s performance in the fall.

Republican hopes for November, in other words, are still just that: hopes. Their December 2017 roll of the dice is looking pretty good at this point, but we’re still a long way from November 2018, at least in terms of voting decisions.

The Challenge of Democrats

For all the uncertainty facing Republicans, Democrats confront an even more daunting series of tasks. First, they must hope that voters won’t be swayed by the modest payoff that the TCJA delivers to many taxpayers. Some recent polls suggest that Democrats could be right about that; a Politico/Morning Consult survey from mid-February found just a quarter of Americans reporting a change in their paychecks (with richer taxpayers more likely to report a benefit than poorer ones).

However, Democrats could have a hard time selling the idea that Republicans deserve to be punished for the tax law’s modest benefits. As Achen and Bartels point out, voters don’t pay very much attention to specific policy changes, especially when the policy in question is “the least bit arcane or divorced from personal experience.” That phrase would seem to describe many of the TCJA provisions that Democrats are complaining about. Meanwhile, Republicans are poised to claim credit for the tax provisions that hit closest to home, in the form of higher take-home pay.

Of course, fairness matters, too. Complaints by Democrats about the disproportionate share of TCJA benefits accruing to rich taxpayers might become part of a compelling narrative about Republican governance. Such complaints can seem remote and arcane, however, especially when many taxpayers are getting an actual tax cut (even if it’s a modest one). The fairness argument against the TCJA is certainly not a slam-dunk at the voting booth.

Ultimately, neither Democrats nor Republicans should count on the TCJA to be much of a factor in November. As Achen and Bartels demonstrate in their sweeping survey of political science literature, policy preferences are a function of preexisting partisanship, not a determinant of voting decisions. Typically, voters decide first which party they prefer, often inheriting their political identity from older family members. Only then, after deciding on their group allegiance, do they consider policy issues in any meaningful way — usually just to reconcile the latter with the former, often through some impressive motivated reasoning. (Witness the radical reshaping of many GOP priorities under the leadership of Donald Trump.)

The derivative quality of policy preferences tends to give politicians a relatively free hand in shaping actual policy. Supporters will tend to accept a change in their party’s policy agenda, simply because it remains their party. The group allegiance is primary, the policy preferences entirely secondary.

As Achen and Bartels point out, partisanship even shapes the perception of objective facts. They cite federal budget deficits in the 1990s as a case in point. At a time when deficits were clearly on the decline, voters diverged sharply in their awareness of this fact. When asked if deficits had decreased, Democrats were more likely than Republicans to answer the question correctly. More striking, Republicans who were generally well informed were even less likely to answer the question correctly than their poorly informed GOP colleagues. “They knew that a Democrat was in office and that the president was in some way responsible for the deficit,” Achen and Bartels write. “They did not know the actual progress of the deficit, but they did know that Democrats do a poor job by their standards. They inferred that Clinton was probably doing a poor job on the deficit, too.”

This example makes Republicans look bad, but Achen and Bartels find the same sort of skewed perception among Democrats. Essentially, voters of both parties are inclined to make the facts — or at least their interpretation of the facts — fit their preexisting party preferences.

All of which suggests that tax policy will not be decisive in November. Republicans will support Republican candidates, and by extension they will probably view the TCJA favorably. Democrats will support Democrats, and will no doubt judge the TCJA a failure (or perhaps a tragedy). The fabled undecided and independent voters will cast their ballots in less predictable fashion, but most votes will turn on durable notions of party allegiance, not assessment of the TCJA and its various (arcane) provisions.

The key variable, as I noted, may well be the short-term trajectory of the economy come November. On that issue — and that issue alone — some meaningful number of voters will exercise their power to hold politicians accountable. Achen and Bartels quote the mid-20th-century political scientist V.O. Key to describe the electorate’s “great, and perhaps principal, role as an appraiser of past events, past performance, and past actions.” As Key continued: “It judges retrospectively; it commands prospectively only insofar as it expresses either approval or disapproval of that which has happened before.”

Achen and Bartels are dubious about the electorate’s ability to make such judgments accurately. All too often, the retrospective theory of accountability translates into a search for scapegoats; politicians get blamed for things they could never control, including natural disasters and shark attacks. (They offer a fascinating look at the political damage that shark attacks in coastal New Jersey did to Woodrow Wilson’s 1916 reelection campaign.)

All things considered, Republicans have reason to be hopeful that the TCJA will deliver some sort of payoff in November. That advantage is likely to be modest, however, compared with other factors that typically affect American elections. To the extent that votes turn on taxpayers’ extremely short-term assessment of their economic well-being, the benefit of the TCJA to the GOP will be deeply uncertain for months to come.