In theory, lower tax rates should be supported by most Americans. A “tax cut” means less money going to Uncle Sam. More importantly, it means more money staying in your pocket. When the money is in your pocket it is ready for you to spend, save, or invest. And you can do it any way you see fit. What is the downside with that?
Why are tax cuts not universally popular?
But tax cuts aren’t as popular as commonsense would lead us to think. The Tax Cuts and Jobs Act (TCJA) of 2017: Only 39% of Americans approve of the new law. Those in opposition stand at 46%. That means, if the polls are correct, millions of Americans oppose tax cuts. They are in favor of being personally poorer. That is a strange choice. Why do Millennials complain about debt load oppose tax cuts?
Part of the reason is the lack of a firm grasp on reality. There are people in America today with a limited understanding of how the TCJA affects them. This is especially true among American Millennials. Nearly 40% of Millennials claim the new law does nothing to change their federal tax burden. Another 27% believe their tax burden will increase. Only 26% say their tax burden will decrease. Only one person in four understands tax cuts put money in their pockets.
It is difficult to grasp how an educated adult American can fail to understand what higher taxes mean. They mean you personally have less to spend. What is more baffling is that they do not discern the desirability of having more spending money. One would think going without less would be a positive thing. Maybe that is the problem. They have never had to go without.
Because news headlines repeat tax reform benefits the rich, many Millennials oppose it on principle. But what principle? According to a Quinnipiac poll, 78% of young voters claim tax cuts primarily benefit the wealthy. Do they miss the point that true or not if the tax cut puts money in their pocket it probably is good for them. But they continue to buy the socialist narrative without critical thought.
Others associate tax reform with President Trump or the Republican Party. Out of pure bigotry, they reject it by association. That is self-harm in the name of ignorance and bigotry. Public opinion regarding the TCJA begins to mirror the ideological tribalism dominating American politics.
If your favorite politicians support tax reform, then you do too. Whatever happened to trying to understand what actually benefits your situation? Have we raised a generation incapable of acting in their own self-interest, without a need to responsibly care for their family?
The reality of the benefit explained
The truth is the TCJA provided about 80% of American taxpayers with a direct tax cut. That is a Brookings Institution calculation. (Brookings is a left-leaning think tank)There are other estimates are closer to 90%. But how many Americans actually know that? How many Millennials know that? Why is that? It appears to be a combination of ignorance, sloth, and gullibility.
The disconnect between public perception and fiscal reality suggests a need for more effective communications. The fact that millions of Millennials do not grasp the fact that they have been given free money after seeing it in their paychecks for two years is disconcerting. It seems that this is a failure to recognize the right answer when told or being willing to cut of one’s own nose to spite their face.
Some think there is an opportunity for them to become open to, if not fully supportive of, pro-growth tax reform. If Millennials fail to recognize the right answer with the money in their pocket they deserve to remain ignorant and poor.
Opportunity or frustration
The Millennial generation may be ripe for a crash course on tax policy. Maybe there will also be a generational attitude shift on the benefits associated with tax cuts. My suspicion is Millennials could use a tax cut more than just about any other age group. Millennials, Commonsense, and Tax Policy, how do we unravel the inconsistency?
Based on recent polling, 60% of Millennials don’t have even $500 set aside. They cannot cover an unplanned car breakdown, medical bill or an unexpected tax bill. Getting extra money seems like it would be impactful and desirable. About 30% of Millennials don’t even have a savings account.
Maybe debt has a lot to do with it. Millennials have racked up an average of $27,900 in personal debt, excluding mortgages. From student loans to credit card bills, Millennials account for more than $1.1 trillion in total debt. That’s about 30% of all U.S. consumer debt. The Millennial generation is the most debt-ridden in American history. They are going to have to find a way to deal with it.
A Millennial should be the ideal target audience for a primer on increased take-home pay. One would think they would recognize higher after-tax savings as a good thing. Is there a better audience is there to understand how an extra $500 or $1,000 per month can make a positive difference? Why do they not grasp the obvious based on personal experience?
Millennials scrambling to pay off their student loans; those needing to start saving are positioned to appreciate the real-world impact of tax reform. Why are they unable or unwilling to understand it, to begin with? Tax cuts are proven to boost net income.
Very few economic policies can be quite as beneficial to a generation needing a higher income. Higher-income that leads to increased savings. It can lead to stock market investments, homeownership, and so forth. Flexibility and freedom come from financial security.
It is difficult to change people’s minds. Addressing preconceived notions and countering them with the truth is never easy. Millennials are no different, and tax policy isn’t the sexiest topic to bring up. But commonsense should kick in at some point. It is worth trying to raise the issue. The opportunity is simply too great to ignore. Millennials, Commonsense and Tax Policy the three should go hand in hand… but don’t.