Saturday, October 30, 2010

The tax cut that no one noticed

In his interview on The Daily Show, President Obama stated that tax cuts were given to 95% of Americans in the Recovery Act. Yes, there was a tax cut. In fact, I got twice the amount of money back that I got under the Bush tax cuts. But no one else seems to know they got a tax cut except for me and a few others who really stay informed.

The National Review, an ultra right leaning magazine, actually ran a piece that said the President’s claim "strained credulity." The same magazine ran another piece insisting, "If the taxes of 95 percent of Americans actully [spelling mistake is theirs] had been cut, surely somebody other than Obama would have noticed."

It is incredible that the Righties think this is a matter of opinion. Obama cut taxes for millions of Americans, but since most people did not really notice their net pay increase, then, according to the Righties, maybe it did not happen. This argument is along the same line as “if a tree falls in the forest, but no on hears or sees it, did the tree really fall?”

The truth is that Democrats passed one of the largest middle-class tax cuts in the history of the country, and Republicans voted against it and fought to kill it. Congressional Republicans, whose inclination is to love tax cuts, refuse to give the president or Democrats in Congress any credit for this. And the general populace seems to have missed the news entirely.

How could a president cut Americans' income taxes by $116 billion and nobody notice? This is not a rhetorical question. At a rally organized recently by a Republican women's club, a half-dozen guests were asked by a reporter what had happened to their taxes since President Obama took office.

"Federal and state have both gone up," said one silver-haired attendee, echoing the comments of others. After further prodding with a reminder that a provision of the stimulus bill had cut taxes for 95 percent of working families by changing withholding rates, the rally attendee’s memory was jogged.

"You're right, you're right," he said. "I'll be honest with you: it was so subtle that personally, I didn't notice it."

This person was so very sure that his federal taxes had gone up because FOX news and Republican leaders (Rush Limbaugh, Sean Hannity, Glenn Beck, Bill O'Reilly, Karl Rove, John Boehner, and Mitch McConnell) had told him so.  But in reality, his taxes had gone down. Anyone can go back and look at paycheck stubs and see that their taxes have been reduced. This happened when Obama signed the Recovery Act into law the first couple of months after being sworn into office. But even when talking to a reporter, the rally attendee’s first instinct was to say the exact opposite of what really happened. He is obviously not the only one who is misinformed.

Less than 10% of the country realizes they got tax cuts. About a third of the population believes their federal taxes actually went up.

The tax cut was designed to be subtle, on purpose, because rebate checks tend to be saved, not spent. So, President Obama and the Democrats set it up so that everyone's paycheck would simply be a little higher every pay period – an average of about $50 a month for the typical working person – about $1200 per year for a middle class two-income family – hoping that more people would be more likely to spend that extra bit.

For the most part, it was effective because the economy is improving – albeit slowly.

How bad is the disconnect between perception and reality? Almost immediately after Obama signed one of the largest tax cuts in American history, right-wingnuts started organizing rallies to announce that they are Taxed Enough Already. The Republican leaders were lying; and the Republican sheep were not paying close enough attention to know the president had just given them a tax break.

Sadly, what makes for good economic policy often has no bearing on politics or public opinion. Obama could have gone with rebate checks that would have been better noticed, but the economic result would have been worse. The president chose to go with an approach that worked better for the economy, but paid little political dividend. Good for the economy. Bad for him. For the good of the nation, Obama is knowingly sacrificing public opinion about himself.

Rush, Sean, Glenn, Bill, and every other Republican mouthpiece has been telling Bubba that Obama raised his taxes – even though they know that their statements are not true – and Bubba believes them because he never noticed that his paycheck has a bit more money in it every week.  When arriving home from work, Bubba is checking his brain at his front door, turning on FOX News, and allowing the lies and misinformation to pour into his skull.

I cannot lay all the blame at the feet of FOX and friends, though, because Obama and the Democrats are very bad at letting the public know about the help they are getting.  Their publicity machine is a failure.

Under Obama, middle class Americans got the biggest tax cut in history, but no one noticed.