In the year and a half since President Donald Trump signed the $1.5 trillion Republican tax cut, polling shows that the law has produced two unexpected results.
The first is that, according to most surveys taken before and after the law’s passage, Congress gave the nation an enormous tax cut it didn’t want and hasn’t come to appreciate. The second and far more stunning discovery is that few Americans even believe they got a tax cut—even though about two-thirds of them actually did. In a poll taken in June by the Associated Press and the University of Chicago’s NORC center, nearly twice as many respondents said their tax bill went up as went down in 2018.
The tax law combined a steep permanent reduction in the corporate-tax rate—from 35 to 21 percent—with temporary cuts to personal-income-tax rates. While the GOP cut tax rates at every level, wealthy Americans and corporations have disproportionately benefited, analyses have found. The polling suggests, however, that whatever economic success the tax cuts have produced, Republicans lost the political argument on their biggest legislative victory in more than a decade—a defeat that likely helped Democrats regain the House majority in 2018 and could hamper Trump’s ability to claim credit for a strong economy as he seeks reelection next year.
No one pushed harder for the law’s passage than Grover Norquist, the conservative activist who has been championing tax cuts at every level of government since the Reagan administration. Norquist, who runs the advocacy group Americans for Tax Reform, is famous for getting most Republicans in Congress to sign a pledge never to vote for a tax increase. In a phone interview, I asked him to assess the impact of the tax cuts, address some of the criticisms of them, and explain why he thinks they remain unpopular with—and even unnoticed by—many Americans.
Norquist called the law “a significant success” and blamed its unpopularity on Democrats and “the establishment press” for convincing the public that the tax cuts were only for the rich and corporations. And he pointed to another culprit for why Americans may not be noticing the effects: Trump’s trade war and the tariffs he has slapped on imports from China, Canada, the European Union, and elsewhere. After a strong 2018 and start to 2019, economic growth has slowed recently, dragged down by a dip in business investment. Though a strong supporter of the president, Norquist told me that while the tax cuts turbocharged the economy, “some of that has been canceled, overwritten, delayed by tariffs.”
Our conversation has been edited for length and clarity.
Russell Berman: We’re now a little over a year and a half out from Trump signing the tax cuts. How do you think they’ve worked out overall?
Grover Norquist: The tax cut has been a significant success. One, we solved the problem of having a 35 percent corporate-tax rate, which made us noncompetitive with the rest of the world. China is at 25 percent, Germany is at 15 percent, Ireland is at 12.5 percent. We were way out of line. So you stopped the bleeding of companies either moving overseas or being purchased by overseas companies in Belgium or Canada. When we ended the worldwide tax system and the highest rate in the world, those together attracted a lot of capital in the United States. Repatriation took place.
Two, it began the process of speaking to “pass-throughs”—those smaller companies, generally smaller; sometimes they get big over time—where you pay your taxes through your personal-income taxes, which means your top rate could be 39 percent, not 21 percent. They’re given a 20 percent exemption. This is a huge, huge step towards allowing small businesses, which start in someone’s garage or out of their back pocket instead of inside a corporate structure, to have tax equity with General Motors and other corporations. That is extremely helpful in terms of starting small businesses and growing them.
Then you have the dramatic 25 percent average reduction in the personal-income taxes paid. So we get more capital per worker. You saw the wage increases in 2018—extremely strong, strongest since 2008. You have the tax cut plus the wage increases—and you’ve got strong consumer spending and then the [business investment].
The tax cut did a great job with that, but some of that has been canceled, overwritten, delayed by tariffs. The good news is that as soon as you have to deal with tariffs, that problem goes away, and you’re right back on track and in much better shape.
Berman: Republicans and conservatives have been working for so many years to overhaul the tax code, to reduce taxes. How did it happen that you were finally able to do it, and Americans don’t even notice and don’t even give you credit for it?
Norquist: Well, on the day that the bill passed, it was underwater, more people against it than for it. As you got closer to April 15, The New York Times had a poll that showed it getting increasingly popular, while at the time, the establishment press and Democrats on TV were saying, “This is only a tax cut for rich people, only for corporations.” Nobody had seen their tax returns. And frankly, when you paid your taxes in 2018, you didn’t get a tax cut, because the tax cut took effect in 2019 for the 2018 taxes. So at first people said, “Things didn’t change.” Well, they’re changing in 2019. As you pay your taxes, you actually see the dramatic reduction.
Berman: Do you put any of the blame, though, on President Trump in terms of selling it? He’s this guy who prides himself on his marketing ability. Do you think he could have sold this in a way that would have blunted what you say was a Democratic misconception campaign?
Norquist: I don’t think so. I mean, the president doesn’t have to do all the heavy lifting. As somebody who has focused an awful lot on the tax issue and not on whether or not we’re going to blow up Syria, I think the president should have spent all his time talking about the benefits of the tax cut. But he was managing many issues. And he has one voice. But you have plenty of networks saying stuff that’s palpably not true. It’s tough headwinds. But Reagan overcame them. The tax cut that Reagan ran on hit on January 1, 1983. And he had one year of strong growth. Four million jobs created; he won 49 states [in 1984].
If we get the tariff wars calmed down, get [business investment] back online, and are pumping at 3 percent–plus [GDP growth], I think people will be pleasantly surprised by the strength of … the economy, but also the politics of the strength of the economy.
Berman: You said that the law has done exactly what you and other Republicans said it would do. Substantively, however, a big criticism is that corporations used the tax cut for record stock buybacks—money that could have gone to new investments like boosting workers’ pay. Even Senator Marco Rubio of Florida was critical of that. Do you think Republicans should have done more to restrict the buybacks or to incentivize companies to invest in a way that would have more directly supported job creation, investment, and higher wages?
Norquist: No. To tell companies how to spend their money would negate the whole point of having them bring it back [through repatriation]. It is good, and it’s healthy for a company to say, “I think we’re the best deal in town.” And if they buy it [back] and their stocks go up, then that suggests that they are the better guy in town. When you buy the stock, somebody else is selling it. So it is good and healthy to bring the money back to the United States and say, “We’re not telling you where to invest it. This is your investment money. You’re going to invest it in something.”
You did see [business investment] shoot up in 2018. That’s gone back down a bit because of the tariffs, and that won’t get fixed until the tariffs are settled and the trade war comes to a negotiated end. Trade wars are wars of choice. Like Iraq. The problem is that when you start them, you’re no longer in charge of deciding when they end: The Afghans get to decide whether the Afghan War is over. That’s the deal. You can’t go, “Oh, we’re tired. We’re done.” And if you start a fight with China, then China’s part of the discussion about when it ends. Or the Europeans. Or the Mexicans. Or the Canadians.
Berman: Was that Trump’s biggest mistake, then, starting the trade war at the moment when he needed the tax cuts to really take off, both economically and politically?
Norquist: My advice was, if you’re going to have a fight with China, it would have been better to have waited a couple years, until the economy was stronger. And then you go to China and say, “You guys have troubles. We’re doing much better.”
We got Mexico to agree on border security. I was not a fan of using tariffs in that way, but it’s a little hard to argue—since Trump got exactly what he wanted at zero cost—that that was a huge mistake. If we end up with a deal in the next seven months where China agrees to treat American capital and investment better, and American companies better, and to stop stealing intellectual property, and the tariffs go away, you’ll see [business investment] explode, you’ll see the stock market go through the roof, and we will be significantly better off for having had the fight. If China just digs in their heels, that could be expensive.