Republicans Struggle to Make Tax Cuts a Winning Election Issue

(Bloomberg) -- Moments after the Republican tax overhaul passed in the Senate in mid-December, Majority Leader Mitch McConnell said that if he and his party members couldn’t sell the cuts to the American people, they should find “another line of work.”

Four months later, some GOP lawmakers who hoped the law would save them from defeat may have to start dusting off their resumes.

Some recent polls show that the majority of Americans still don’t support the tax law, despite an uptick in sentiment since the end of 2017. And a special House election in a conservative district of Pennsylvania in March delivered an upset victory to the Democratic candidate, who’d framed the tax cuts as a giveaway to the wealthy.

“If they can’t run on tax cuts in a district Trump won by 20 [points] and win, where can they run on tax cuts and win?” said David Wasserman, House editor of the nonpartisan Cook Political Report.

After most individual taxpayers finish up their returns this week, all eyes will turn to what the tax code revamp means for next year’s filings and beyond. Part of the Republican party’s problem in selling the tax cuts is that the answer is murky for many. Variables like dependents and itemized deductions can complicate the picture, even though most -- 65 percent -- will see a tax cut in 2018. And even for voters who do see a cut, whether it’s enough to sway their decisions at the ballot box is far from clear.

Not Life-Changing

“Most middle-class Americans got a little extra money, but it wasn’t life changing,” said Western Pennsylvania-based Democratic strategist Mike Mikus. “They’d prefer Social Security and Medicare is protected.”

Every House seat and one-third of those in the Senate are up for grabs in November. For Republicans, promoting the tax overhaul -- which is likely to be their only major legislative accomplishment under President Donald Trump by then -- is considered crucial to keeping control of Congress.

NBC News/Wall Street Journal, Gallup and Quinnipiac University surveys show that the law started polling better earlier this year, but approval as of March was still below 50 percent. Sentiment was boosted when some companies announced bonus payouts to workers, as well as by bumps in take-home pay after new withholding tables were issued by the Internal Revenue Service. Still, only about a third of respondents have said they noticed an increase in their paychecks, according to surveys by Gallup and CNBC last month.

‘Continue to Brag’

“It will only play well if we continue to remind folks what the benefits are. People started getting more money in their paychecks in February -- by November they may not remember that," said Representative Mike Conaway of Texas. “We’re going to have to continue to brag on it all year.”

Most voters say taxes aren’t a top concern. Among the issues they selected as most important to them going into the midterm elections, taxes ranked last, with just 8 percent of respondents choosing it, the Quinnipiac survey showed.

Republican leaders are aggressively touting positive stories of middle-class Americans who have benefited from the tax cuts, and are considering a second phase to make individual changes permanent, as corporate tax cuts are. The aim is to produce camera-ready material for television ads, attacking Democrats for opposing middle-class tax relief.

Higher Premiums

For their part, Democrats are trying to emphasize that middle-class Americans aren’t the biggest beneficiaries of the tax cuts.

“The benefits flow to the wealthiest and to corporations that are already sitting on record piles of cash,” said Representative Beto O’Rourke, the Texas Democrat challenging Republican Senator Ted Cruz in November in a race the incumbent is favored to win. “I think Texans know that we can do a lot better.”

O’Rourke said the law’s repeal of the individual mandate tax penalty that started under the Affordable Care Act will lead to higher health-care premiums. That will offset the lower tax rates and almost doubling of the standard deduction for the middle class, he said.

Democrats in high-income, high-tax states such as New York, New Jersey, California and Illinois are also highlighting how some of the Republican incumbents voted to limit the state and local tax deduction. Winning in suburban districts is critical for Republicans to hold onto the House.

No Slam Dunk

Republicans in big-ticket races see the tax cuts as a benefit that will help them secure victory, but they’re careful not to frame them as a slam dunk.

“I wouldn’t say it’s ‘the’ issue that affects the election. It’s a big issue,” said Representative Kevin Cramer of North Dakota, a Republican challenging Democratic Senator Heidi Heitkamp in the conservative Northern Plains state. “It’s getting harder and harder for Senator Heitkamp to demonize it,” he said. Heitkamp has slammed the law as a deficit-raiser that’ll primarily benefit the wealthy.

Representative Peter Roskam, who helped craft the legislation and faces a challenging re-election bid in the Chicago suburbs, said his constituents have "welcomed" the tax relief, and that the cuts are central to his campaign. His opponent has said he’s throwing his district under the bus with the new cap on state and local tax deductions.

‘Bad Old Days’

House Ways and Means Chairman Kevin Brady, one of the architects of the tax overhaul, is trying to convince apathetic voters to care about taxes, including with warnings that Democrats will seek to reverse the tax breaks if they take control of Congress.

“That’ll be the defining question in November,” Brady said. “Do you want to go back to the bad old days where Washington took more of what you earned?”

But even the president seems to have trouble staying on topic. Trump literally threw away what he called "boring" remarks about taxes at an economic roundtable in West Virginia on April 5, riffing instead on sending U.S. troops to patrol the border, his 2015 campaign announcement speech about Mexican immigrants, and other subjects.

To contact the reporter on this story: Sahil Kapur in Washington at skapur39@bloomberg.net.

To contact the editors responsible for this story: Alexis Leondis at aleondis@bloomberg.net, Ros Krasny

©2018 Bloomberg L.P.