The Spectacle Blog

Spending Equals Taxes, Obama Tax Cut Edition

By on 10.19.10 | 12:57PM

Michael Cooper reports in the New York Times that most Americans are unaware that the stimulus bill included tax cuts for the majority of workers: 

HUNTERSVILLE, N.C. - What if a president cut Americans' income taxes by $116 billion and nobody noticed? 

...

In a troubling sign for Democrats as they head into the midterm elections, their signature tax cut of the past two years, which decreased income taxes by up to $400 a year for individuals and $800 for married couples, has gone largely unnoticed.

In a New York Times/CBS News Poll last month, fewer than one in 10 respondents knew that the Obama administration had lowered taxes for most Americans. Half of those polled said they thought that their taxes had stayed the same, a third thought that their taxes had gone up, and about a tenth said they did not know. As Thom Tillis, a Republican state representative, put it as the dinner wound down here, "This was the tax cut that fell in the woods - nobody heard it."

The president's most ardent supporters use this fact, that the tax cuts have gone widely unacknowledged, as evidence of his unappreciated brilliance in policymaking, and the president himself has mentioned this fact as an example of how his administration is downright perverse in doing the right thing for the economy. 

The public's ignorance of the stimulus tax cuts, however, indicates a few realities that the Obama administration would prefer not to have to address. 

The first is that during Obama's first two years taxes have in fact gone up. The stimulus tax cuts are only one of many changes to the tax code. Americans for Tax Reform reports that the 111th Congress enacted $352 billion in net tax hikes. Although most of those taxes are obscure and will not take effect as immediately as the stimulus tax cuts have, there can't be any doubt that they have shaped the public's understanding of the tax outlook. After all, cigarette smokers and tanning salon patrons -- who will suffer large targeted tax increases -- number in the millions. 

Also, the public's indifference to the stimulus tax cuts suggests that they are forward-looking in their economic decision-making. Under Obama's tenure, the $3 trillion-plus that has been added to the federal debt far outweigh the $116 billion in tax cuts. Taxpayers probably understand that that debt will translate to tax increases sooner or later. And when they see Obama and the Democrats trying not to extend all the Bush tax cuts for next year, they probably figure that the increases are coming sooner rather than later. In general, many of the Obama administration's counter-cyclical economic policies have been predicated on the assumption that to some extent people don't think rationally about their future prospects in the short term. The Tea Parties decrying the not-yet-materialized massive tax hikes should give them pause. 

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