By contrast, Obama’s predecessor, George W. Bush, when faced with a slowdown, opted for rebate checks. Still, that wasn’t enough to overcome the financial crisis.
“He lost the chance to get credit for a tax cut,” Baker said of Obama. “The differences between reducing withholding and sending a check are very small, so the psychology is worth just sending the check.”
Voters have also critiqued Trump’s 2017 tax overhaul because it was structured so that taxpayers had less withheld during the year, resulting in lower refund checks when they filed their tax returns this spring. Even though most taxpayers got a tax cut, some felt as though they didn’t because they received a smaller refund check than in year’s past.
This isn’t the first time the White House has floated a tax cut when facing political headwinds. Last fall, ahead of the midterms where Republicans ultimately lost their majority in the House, Trump suggested he would cut taxes for middle-earners by 10%. The tax cut announcement came as a surprise to administration officials and Trump’s allies in Congress. That plan was never released.
Any tax cut plan would have to go through Congress, meaning Trump would need to convince Democrats in the House that a tax cut is necessary at this point in the economic cycle and not merely a tactic to boost his re-election chances. And any payroll cut would likely be costly -- the Committee for a Responsible Federal Budget estimates a payroll tax holiday would cost between $70 billion to $75 billion per percent cut each year.
“It’s hard to answer whether we are really at a point in the business cycle where we should provide a stimulus,” said Alan Viard, a scholar at the American Enterprise Institute. “Donald Trump would not be the first president to suggest to stimulate the economy right before an election.”
This story provided by Bloomberg News.