Tax cuts have been controversial, but voters didn't seem to care about them
Nov. 15, 2018
Voters in the midterm elections felt neither tremendously motivated by the 2017 tax cuts nor had their lives been changed much by them, according to NBC News exit polls.
Among those interviewed after voting Tuesday, some 45 percent said the tax cuts had no impact on their personal finances.
In terms of how it affected their midterm election vote, there was no direct question on taxes, but just 22 percent listed the economy as their top priority. More cared about health care (41 percent) and immigration (23 percent).
Responses did, however, shift sharply along party lines, with 84 percent of Republicans saying the new tax laws helped their personal finances against just 15 percent of Democrats. By the same token, 83 percent of Democrats said the cuts hurt their finances vs. just 15 percent on the GOP side. The no-impact category split 62 percent for Democrats and 36 percent for Republicans.
President Donald Trump has touted the tax cuts as central to the economic momentum seen since his election. Quarterly GDP gains have averaged 2.83 percent since Trump took office in January 2017 after rising just 1.6 percent the year before.
Views on overall household finances also split along party lines, with 69 percent saying they had seen no change over the past two years. Just 21 percent of Democrats noted improvement against 77 percent of Republicans. That conflicts with findings from Evercore ISI, which said this week that research shows the average household has seen a $363 monthly gain in disposal income this year, $85 of which has come from reductions in income tax withholding.
The tax question will be coming up again when the new Congress takes over in January.
Trump and the GOP leadership have tossed out the possibility of a "Tax Cut 2.0" proposal that would more closely target middle-income families. Democrats, though, are likely to balk and instead look at ways to plug the widening deficit, with any future big spending plans aimed at infrastructure rather than taxes.
"We expect no major tax legislation to become law under a divided Congress," Alec Phillips, an economist at Goldman Sachs, said in a note. "Our projections of the growth impulse from fiscal policy assume no substantial tax changes will be enacted over the next few years, and the election result should not change this assumption."
Phillips said House Democrats may want to adjust the tax cuts already in place toward lower-income earners, and even could look at repealing the corporate tax rate decrease. Those plans, though, likely would die in the Senate, which remains in Republican control.
Infrastructure, on the other hand, represents some common ground between Trump and the expected Democratic leadership. Spending on roads, bridges and transportation and other public works projects "over time can boost U.S. productivity growth, thus managing a smoother transition from the current tax-cuts fueled expansion to a more sustainable pace of growth in the years ahead," said Lena Komileva, chief economist at G+ Economics.
"But, even if cross-party agreement can be reached, infrastructure spending carries a long lifespan from planning to return on investment," she added.
Even if the two sides can hammer out an aggressive infrastructure bill, which would be the final step in Trump's three-pronged approach that also includes lower taxes and less regulation, the earlier steps taken likely will remain largely untouched, according to the initial unofficial consensus following the midterms.
"Donald Trump's economic policies will remain intact," said Greg Valliere, chief global strategist at Horizon Investments. "He won't get new initiatives passed in the House, but Trump's tax cuts and deregulation are good for at least another two years."
CNBC / Economy section