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Trump tax cut proposal admits GOP tax law failed for midterm elections

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  • The GOP was counting on the GOP tax law passed in December to
    be a cornerstone of their midterm election strategy.
  • But the bill is wildly unpopular, and most Americans believe
    it benefits the wealthy and corporations.
  • Many analysts believe President Donald Trump’s unexpected
    promise that another tax cut is on the way is an admission that
    the first tax bill “has failed politically.”

As the GOP tax law was set to pass in December 2017, Senate
Majority Leader Mitch McConnell declared that the Tax Cuts and
Jobs Act would be a centerpiece of the party’s messaging strategy
for upcoming elections.

If we can’t sell this to the American people, we ought to
go into another line of work,” McConnell

said.

They might want to start looking around.

As the midterm election approach, economists and policy
analysts say the tax law has become a political dud, Perhaps the
most prominent evidence: President Donald Trump’s stunning
promise of a new 10% tax cut for the middle class.

Trump said last weekend that Republicans would pass a tax cut
aimed directly at the middle class before the midterms. Since
then, Trump and congressional Republicans leaders have
backtracked on both the timeframe and the scope of the cut

But Chris Krueger, a policy analyst for Cowen Washington Research
Group, said the implicit message is clear.

“It’s a pretty clear indication that the GOP’s tax bill is
not paying the dividends that is promised — quite the opposite in
fact,” Kreuger told Business Insider. “Seems that only Democrats
are really talking about it — and all in a negative
fashion.”

The
TCJA does not poll well.
 Even Republican
voters
think that the bill mostly
benefits wealthier Americans and corporations
. Republican
candidates and political action groups have
largely declined to employ the bill in campaign ads
as a tool
to rally voters.

Greg Valliere, chief global strategist at Horizon Investments,
similar said that the new proposal was a “clear admission
by Trump” that the TCJA “has failed politically.”

It’s not likely any new tax cut will become law

While Trump’s proposal may serve as an admission of political
failure, the next question becomes just how seriously to take the
promised second round of cuts.

Short answer:
not seriously
.

Congress is out of session until after the midterms. And for at
least the foreseeable future, Republicans do not have a path to
getting another major tax cut through Congress. Isaac Boltansky,
a policy analyst at the research and trading firm Compass Point,
also noted that many lawmakers — including a large contingent of
Republicans — are growing more conscious of the growing federal
debt.

“We continue to believe that there is no path to passage for an
additional tax cut in this Congress given the lame duck dynamics
and the renewed headline focus on deficits,” Boltansky said.

While the GOP had little problem overlooking the TCJA’s $1.5
trillion price tag, adding another lump of debt on top of the
previous round would likely give GOP deficit hawks heartburn.

“This is the height of cynicism, promising more candy ahead
of an election, but Trump will fight hard for it next year — and
a pity on members of Congress (especially Republicans) who resist
putting more money in voters’ pockets,” Valliere said.

“Trump will make them foils, which he does very, very
well,” he added.

‘This is just political theater’

Boltansky said he is skeptical that Trump’s slapdash declaration
would add any juice to Republican voter turnout.

This is just political theater, but this show wouldn’t
make it on Broadway as it lacks specificity, the rollout was
shambolic, and we knew how it would end the minute it began,” he
told Business Insider.

If a vague, late-breaking promise may not drive voters out
to the polls in just a few weeks’ time

, there could
be a longer-term political strategy at play.

According to most economists and think tanks, the economic
boost from the tax cuts could be short-lived. So another round of
tax cuts enacted in 2019 could help extend the sugar high growth
through a 2020 reelection campaign for Trump.

“Trump must sense that the huge fiscal stimulus this year
will fade by late 2019 — and he wants a roaring economy heading
into the presidential election,” Valliere suggested. “So he’s
pitching this tax cut now in the hopes that it could be a booster
shot for the economy a year from now.”

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