At about this time one year ago, things weren’t looking good for the GOP. In the wake of a special Senate election in Alabama — in which the Republican Party had rallied behind the failed candidacy of a theocratic ephebophile — Democrats had jumped out to a commanding lead in the congressional generic ballot. Money was flooding into Team Blue’s campaign coffers. Republican incumbents were heading for the revolving doors.
But GOP operatives insisted that the “blue wave” on the horizon would crest long before November — because the Trump tax cuts were about to kick in. Once voters saw fatter paychecks, Republicans would see better poll numbers. And just to be sure that voters noticed all the good Paul Ryan had done for them, the Trump administration reportedly pressured the IRS to err on the side of withholding too little from Americans’ paychecks “so people will see big increases in their take-home pay ahead of this year’s midterm elections.”
This did not work out as planned. Even with (allegedly) light withholding, the the tax bill’s breaks for middle-class people weren’t large enough to attract much notice. Between changes in salaries, health-care premiums, and 401(k) contributions, most Americans didn’t detect much tax relief in their paychecks. The Trump tax cuts actually became less popular after they took effect. And, of course, Paul Ryan’s majority drowned in a blue wave.
Now, the bill for the GOP’s (reported) withholding shenanigans is coming due: The average American’s tax refund was 8.4 percent lower in the first week of 2019 than it was one year ago (under the pre-Trump tax code). And while Americans have trouble noticing tax changes when they’re dispersed across 12 to 24 separate paychecks, they do typically pay very close attention to the size of their refunds. About three-quarters of the country typically qualifies for a tax refund most years — and for many of those households, that check from the IRS is the largest lump sum they’ll receive all year.
“Ask people how much they paid in taxes, nobody knows. Ask them how much they got in their refund, people know,” Howard Gleckman , a senior fellow at the Tax Policy Center, told the Intercept’s David Dayen this week. “Everyone focuses on size of the refund, and it does affect perception.”
In other words: It looks as though the Republican Party implemented their signature tax bill in a manner that will lead many people who received tax cuts to believe that Donald Trump raised their taxes.
Now, we’re only one week into tax season. And it isn’t 100 percent certain that the IRS’s withholding tables were way off. But current evidence suggests they were. And if that’s the case, then the GOP’s efforts to game withholding won’t just lend credence to the Democrats’ most hyperbolic attacks on the Trump tax cuts — they could also depress economic growth as the 2020 campaign gets underway. As Dayen explains:
[Americans] plan consumer purchases, particularly durable goods and big-ticket items, around [tax refunds]. There’s an entire cottage industry of refund advance loans, where filers get refunds immediately from their tax preparer and pay them back when the IRS completes the return … 102 million taxpayers received refunds last year, with an average of $2,778. And most of those went out the door for some wish-list item or a crucial household necessity that had been put off.
… If refunds do come back lower, experts agree that there will be a decided impact on consumer spending, as those big-ticket items don’t get purchased. To the extent that filers rely on their refund for necessities, it could have more dire consequences than just slower economic growth.
Running for reelection on the strength of a failed attempt to throw millions off of health insurance — and a tax cut that did a lot for the rich, and only a little for the middle class — seems hard. Doing so after you’ve accidentally led millions of Americans to (falsely) believe that you raised their taxes seems harder.
