Here's Why Some People Are Now Paying More Under Trump's Tax 'Cut'
A tax policy expert explains why some voters may be outraged at what they owe under the new system.
Photo by MANDEL NGAN/AFP/Getty
One of the many internet subcultures to pop up in the Trump era is the schadenfreude-laden discourse around Trump voters who now regret their choice, often after ignoring the warnings of scores of friends and family. Though typically found on the “Trumpgrets” subreddit, one of these public shamings recently went viral in the form of a Monday tweet collecting screenshots of supposed Trump voters shocked to learn they’d be paying more in taxes, thanks to the president’s Tax Cuts and Jobs Act.
That bill, though built around a tax cut that mainly benefited the wealthy and corporations, contained a lot of other provisions that may have not been obvious to the general public at the time. Some polls have shown that voters don't much like the tax bill (though Republican donors certainly do), and the cuts have largely not trickled down to workers.
But did it also raise taxes on a significant number of Americans? To help make sense of this, VICE turned to Vanessa Williamson, a senior fellow in governance studies at the Brookings Institute:
VICE: Under what circumstances might someone be paying more this year?
Vanessa Williamson: The Tax Cuts and Jobs Act, on average, cut taxes for all income groups, especially for very high earners. But a certain percentage of households at all income levels were likely to see a tax increase. Overall, our estimates at the Tax Policy Center were that about 5 percent of taxpayers would see an average federal tax increase of about $2,800, and that is clearly happening.
For instance, the people in the middle quintile of earners, something like 90 percent of them saw a tax cut under the TCJA, and about 7 percent saw a tax increase of about $900 on average. But people in the quintile below that, about 5 percent of them saw a tax increase. And in the quintile above [the middle], about 7 percent saw an increase too. So, it's not just earners at a particular income level that saw that will see a tax increase this year. It's something that a small percentage of people at all income levels will have seen.
What are some specific factors that could cause these individuals to experience this increase?
There are a couple of major provisions that will have mattered. Most obviously, the SALT deduction—the amount of your state and local taxes that you can deduct from your federal income taxes—is now capped at $10,000. So, for people who pay a lot of state and local taxes, that is going to cost them money. It was obviously an issue in certain electoral districts, particularly purple districts in blue states, places like California and New Jersey, New York. If you're a high earner in those states, you make enough money that you pay a lot in taxes at the state level and now you also make enough money that itemizing your federal return makes sense. So, if you're in that category, you may have a lost out on the TCJA.
The home mortgage interest deduction was also capped, although I'm not sure how much of those effects should really be felt at this point since it hasn't been very long. There was a change for alimony. I think you probably would have had to get a divorced in the last two months for it to matter. But still, it is a change.
New York Governor Andrew Cuomo recently attributed a dip in state revenue to the changed tax policy and claimed that the wealthier taxpayers of those states are changing home addresses or moving to avoid paying at the new rates. Do you think there’s merit to those claims, and do you believe the TCJA was designed in part to hurt blue states?
Was it a political consideration that the people they were going to be raising taxes on were wealthy people in blue states and therefore more likely to be Democrats? I mean, we certainly heard all throughout the process that that was a consideration. Now, the idea that rich people move when taxes go up—that is simply not borne out by the facts, frankly. If you think about where very, very rich people are, they're in places like New York and California. Sometimes they move to Florida when they retire. But, beyond that, there has been very comprehensive research looking at whether wealthy people move because tax rates are high and the canonical work on this is literally called The Myth of Millionaire Tax Flight .
While it may have been a political consideration that capping the state and local tax deduction was basically aimed at blue states, it's very unlikely to have resulted in many wealthy people moving. These are typically older people who are invested in their communities. As a rule, it's not a population that moves around nearly as much as, for instance, younger people who have far less resources on average.
Were there major misconceptions that voters had about the TCJA and how it would affect them?
One thing that struck me is that rank-and-file Republican support for the TCJA was considerably weaker than you might anticipate given that it was the signature legislative achievement of the Republican Congress. A number of polls suggested that Republicans recognized that this bill was predominantly aimed at cutting taxes for extremely wealthy people and did not therefore personally expect to benefit very much from the law.
You see the fact that it wasn't a real political winner in the strategic choices made by Republican legislators not to really run in 2018 on the legislation. The only place you really saw the TCJA as a prominent component of the political campaign in the fall was in those places where the SALT deductions were controversial.
Do you anticipate further “unforeseen” consequences or changes for taxpayers due to this act?
The law was written so quickly that there are any number of loopholes and errors that are continuing to be uncovered. The fact that some low, moderate, middle, and upper-middle taxpayers were going to see a tax increase is something new that was all the models of the legislation would have predicted.
Will any of this actually change how people will vote?
The idea that small changes in people's individual taxes would change the voting behavior of any substantial number of voters is highly unlikely. Partisanship is very, very strong in this country and, as a rule, Americans engage care a lot about the economy when they think about who they vote for president, for instance. But they are what social scientist call sociotropic. That is to say they are focused on the overall state of the economy as opposed to their own pocketbooks. So, I'm not saying, of course, that there were no people who have begun to look at their tax responsibilities for the year and are upset to discover that their taxes have gone up and therefore will vote differently, but it is not typically how political scientists think about how voting decisions are made.
This interview has been edited and condensed for clarity and length.
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