Everyone got a tax cut, averaging 4.4 percent of their income. But the biggest cuts, 6.3 percent to 7.7 percent, went to the middle three quintiles. The affluent-but-not-startlingly- rich got the least, because they couldn’t shelter income the way richer people could, and the lowest quintile got the second least, because they didn’t pay much in tax to begin with.
Wait -- I know what you’re going to say. “What about payroll tax?” This includes payroll tax. It includes everything -- income, federal, and the quintile’s share of taxes that aren’t levied directly on them, like corporate and excise taxes (which ultimately have to be paid by some person, whether that person is a shareholder, vendor, or employee). At this point, taxes are simply a much more negligible part of the expenses in most people's lives.
And even if we look at the most visible taxes, we simply don’t see a population groaning under the lash of the IRS. Here’s what happened to income taxes in the same period.
And also ...
Except in the lowest quintile, no one is paying significantly higher effective payroll taxes -- and for those people, the higher payroll tax has been offset by the earned income tax credit, and higher in-kind benefits from the government, such as Medicare and Medicaid.
Unless you’re planning to touch payroll taxes -- and if you do, how are you going to pay for Social Security? -- it’s going to be very hard to get those bottom three or four quintiles interested in your tax reform, because their income taxes are already negligible. And since that group has 80 percent of the people in the country, that means it’s going to be very hard to get elected on a platform of tax cuts.
You can see this in the polls. The number of people who think their taxes are too high has fallen dramatically since Bush enacted his tax cuts. It’s still 50 percent of the country, to be sure -- since when have people wanted to pay more taxes? But only 1 percent of the country cites this as their top economic issue, and only 5 percent of families cite taxes as their biggest financial problem. It’s pretty easy to guess which quintile that 5 percent falls into. And at that, many of those people may be thinking of property taxes, or state and local taxes, over which a Republican president would have no control.
There is simply no way to make federal tax cuts add up to a winning strategy in this day and age. It’s great for the donor base and the think tanks. But it’s going to fall on deaf ears among the voters, who just don’t care that much. Even people who are ideologically committed to tax cuts, regardless of the effect on their own wallets, are probably less likely to get excited and go out and vote on the issue when it means so little to their own personal lives.
Moreover, Republicans now have the same problem that Democrats and Republican New-Deal-Lite types had in 1979: they’ve delivered on the tax cuts, and the tax cuts did not deliver on the fabulous promises of economic growth. You might be able to get people to go along with your low tax plan if you could credibly claim it was going to deliver a lot of stable, high-paying jobs. But even if you think that it actually will (my own belief is that lower taxes do improve economic growth in the long term, though not enough to make the tax cuts pay for themselves), the "low tax" brand is too tarnished to convincingly sell it to enough average voters.
That doesn’t mean that people hate tax cuts, the way they hated taxes in the 1970s. After all, they were paying high taxes in the 1970s; these days, they aren’t. It's just not that motivating an issue any more. And because the federal system is already so progressive, any plausible reform is going to get scored by the Congressional Budget Office as delivering the lion’s share of its benefits to the wealthy, which will further impress upon them the irrelevance of the Republican platform to their own lives.