Trump's bewildering new tax cut proposal is 'the height of cynicism' and an admission the Republican tax law failed politically

Oliver Contreras – Pool/Getty ImagesUS President Donald Trump
  • The GOP was counting on the GOP tax law passed in December to be a cornerstone of their midterm election strategy.
  • But the bill is wildly unpopular, and most Americans believe it benefits the wealthy and corporations.
  • Many analysts believe President Donald Trump’s unexpected promise that another tax cut is on the way is an admission that the first tax bill “has failed politically.”

As the GOP tax law was set to pass in December 2017, Senate Majority Leader Mitch McConnell declared that the Tax Cuts and Jobs Act would be a centrepiece of the party’s messaging strategy for upcoming elections.

“If we can’t sell this to the American people, we ought to go into another line of work,” McConnell said.

They might want to start looking around.

As the midterm election approach, economists and policy analysts say the tax law has become a political dud, Perhaps the most prominent evidence: President Donald Trump’s stunning promise of a new 10% tax cut for the middle class.

Trump said last weekend that Republicans would pass a tax cut aimed directly at the middle class before the midterms. Since then, Trump and congressional Republicans leaders have backtracked on both the timeframe and the scope of the cut

But Chris Krueger, a policy analyst for Cowen Washington Research Group, said the implicit message is clear.

“It’s a pretty clear indication that the GOP’s tax bill is not paying the dividends that is promised – quite the opposite in fact,” Kreuger told Business Insider. “Seems that only Democrats are really talking about it – and all in a negative fashion.”

The TCJA does not poll well. Even Republican voters think that the bill mostly benefits wealthier Americans and corporations. Republican candidates and political action groups have largely declined to employ the bill in campaign ads as a tool to rally voters.

Greg Valliere, chief global strategist at Horizon Investments, similar said that the new proposal was a “clear admission by Trump” that the TCJA “has failed politically.”

It’s not likely any new tax cut will become law

While Trump’s proposal may serve as an admission of political failure, the next question becomes just how seriously to take the promised second round of cuts.

Short answer: not seriously.

Congress is out of session until after the midterms. And for at least the foreseeable future, Republicans do not have a path to getting another major tax cut through Congress. Isaac Boltansky, a policy analyst at the research and trading firm Compass Point, also noted that many lawmakers – including a large contingent of Republicans – are growing more conscious of the growing federal debt.

“We continue to believe that there is no path to passage for an additional tax cut in this Congress given the lame duck dynamics and the renewed headline focus on deficits,” Boltansky said.

While the GOP had little problem overlooking the TCJA’s $US1.5 trillion price tag, adding another lump of debt on top of the previous round would likely give GOP deficit hawks heartburn.

“This is the height of cynicism, promising more candy ahead of an election, but Trump will fight hard for it next year – and a pity on members of Congress (especially Republicans) who resist putting more money in voters’ pockets,” Valliere said.

“Trump will make them foils, which he does very, very well,” he added.

‘This is just political theatre’

Boltansky said he is sceptical that Trump’s slapdash declaration would add any juice to Republican voter turnout.

“This is just political theatre, but this show wouldn’t make it on Broadway as it lacks specificity, the rollout was shambolic, and we knew how it would end the minute it began,” he told Business Insider.

If a vague, late-breaking promise may not drive voters out to the polls in just a few weeks’ time, there could be a longer-term political strategy at play.

According to most economists and think tanks, the economic boost from the tax cuts could be short-lived. So another round of tax cuts enacted in 2019 could help extend the sugar high growth through a 2020 reelection campaign for Trump.

“Trump must sense that the huge fiscal stimulus this year will fade by late 2019 – and he wants a roaring economy heading into the presidential election,” Valliere suggested. “So he’s pitching this tax cut now in the hopes that it could be a booster shot for the economy a year from now.”

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