Republicans have passed one of the most unpopular pieces of major legislation since the invention of modern polling. But GOP leaders appear thoroughly unconcerned, and they’re all pointing to a particular date on the calendar for when things will turn around.
“Americans will see lower taxes beginning in February,” President Trump tweeted shortly before final passage. The plan’s popularity will change in February, concurred White House Economic Director Gary Cohn. “On February 1, [Americans] are going to see bigger paychecks,” said House Speaker Paul Ryan.
February is when tax-withholding tables would change to reflect the new code. Once that formula for estimating what comes out of paychecks gets tweaked, Americans will feel richer, spend their windfall, rocket-launch the economy, and fall to their knees thanking Republicans for the good times ahead. And GOP leaders are weirdly confident about this. Why?
Maybe it’s because the person ultimately responsible for those withholding tables is a Trump political appointee serving as the “acting” commissioner of the Internal Revenue Service. And while this official, former Ernst & Young executive David Kautter, isn’t sitting in a room alone working on the withholding tables, critics fear the possibility for abuse exists—that Trump’s team could artificially goose US paychecks in 2018 to make the tax cut look bigger for the working class in advance of midterm elections.
The tax plan represents a serious implementation challenge even without politicization. Applying the once-in-a-generation overhaul to withholding, along with all the other guidelines and regulations the IRS needs to write, will prove so complicated that Congress, on page 540 of the bill, gave the Treasury Department the option to make withholding rules the same for 2018, which would mean no change to paychecks whatsoever. However, last week the IRS said in a statement that it is “taking the initial steps to prepare guidance on withholding for 2018,” which would be completed by February.
The secret sauce tax officials use to estimate withholding is “part formulaic and part art,” said Mark Mazur, a former assistant secretary for tax policy at the Treasury Department and is now director of the Tax Policy Center. Attorneys and processors of individual returns work with payment processing companies and large employers to arrive at the formula, and usually they err on the side of over-assessing, as most people end up getting a refund.