The tax cut that wasn’t noticed

THE TAX CUT THAT WASN’T NOTICED…. In his State of the Union address earlier this year, President Obama noted the tax cuts in the Recovery Act. Conservatives who usually applaud such things seemed annoyed.

Shortly after the speech, National Review ran one piece that said the “strained credulity” with the claim. The same outlet ran another item insisting, “If the taxes of 95 percent of Americans actully [sic] had been cut, surely somebody other than Obama would have noticed.”

For the right, this seemed to be a matter of opinion. Obama says he cut taxes for millions of Americans, but since people didn’t really notice, the argument goes, then maybe it didn’t happen.

But there was an objective truth here. 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. As it turns out, though, even those inclined to like tax cuts aren’t inclined to give the president or Congress any credit for this, because they missed the news entirely.

What if a president cut Americans’ income taxes by $116 billion and nobody noticed?

It is not a rhetorical question. At Pig Pickin’ and Politickin’, a barbecue-fed rally organized here last week 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 Bob Paratore, 59, from nearby Charlotte, echoing the comments of others.

After further prodding — including a reminder that a provision of the stimulus bill had cut taxes for 95 percent of working families by changing withholding rates — Mr. Paratore’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.”

Mr. Paratore was certain that his federal taxes had gone up, when in reality, they’d gone down. It’s not subjective — he can go back and look at his paystubs and see that his taxes were reduced when Obama signed the Recovery Act into law. But even when talking to a reporter, his first instinct was to say the exact opposite of what really happened.

The point, of course, is not to pick on one guy at a Republican rally, because he’s obviously not the only one who’s confused. Less than 10% of the country knows about the tax cuts, while about a third of the population thinks their federal tax burden went up, even though it didn’t.

Oddly enough, this was not entirely an accident. In fact, the tax cut was designed to be subtle — rebate checks tend to be saved, not spent, so Obama made it so that everyone’s paychecks would simply be a little higher every pay period — an average of about $65 a month, for the typical family — hoping that more people would be more likely to spend that extra bit, and for the most part, it was effective.

But what makes for good 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 policy result would have been worse. The president chose to go with an approach that worked better, but paid fewer political dividends.

Indeed, almost immediately after Obama signed one of the largest tax cuts in American history, right-wing zealots started organizing rallies to announce they’re Taxed Enough Already. The disconnect didn’t seem to bother them, because they didn’t understand their own issues, and weren’t paying close enough attention to know the president had just given them a tax break.

Jonathan Cohn added, “[T}he political implications seem pretty clear. Obama gets a lot of blame for things he didn’t do wrong and very little credit for things he did right. It’s not the best place to be on the eve of midterm elections.”