A Trump Landslide in 2020?

Plus, the politics of tax refunds

A Trump Landslide in 2020?

Despite low approval ratings, constant controversy and the perpetual peril of numerous ongoing investigations, multiple economic models with successful track records of picking presidential winners currently forecast President Trump easily winning another term, Politico’s Ben White and Steven Shepard write.

"The economy is just so damn strong right now and by all historic precedent the incumbent should run away with it," Donald Luskin, chief investment officer of research firm TrendMacrolytics, whose model correctly called a Trump win in 2016, tells them.

Luskin’s model factors in GDP growth, gas prices, inflation, disposable income, taxes and payrolls. It has Trump winning comfortably, with 294 electoral votes.

A sharp economic slowdown could change that, and the effects of the GOP’s 2017 tax cuts could be a factor. The White House sees the tax cuts helping to keep the economy humming at a growth rate above 3 percent through 2020, while independent forecasters project that the tax cut stimulus will fade, leaving the economy growing more slowly.

“Even if you have a mediocre but not great economy — and that’s more or less consensus for between now and the election — that has a Trump victory and by a not-trivial margin,” Yale economist Ray Fair tells Politico.

Trump’s legal troubles could also change the 2020 outlook — and it’s possible that the conventional models don’t correctly account for the wide gap between public views of the economy and public opinion of Trump. After all, Republicans did lose the House in last year’s election, even with a strong economy.

“For the economic models to be correct, voters would have to shrug off much of what they dislike about Trump and decide the strength of the economy makes a change unwise,” White and Shepard write.

Read their full piece here.

Trump Tax Law Is Getting More Popular, but Smaller Refunds Could Hurt Him and the GOP

The size of your refund check from the IRS doesn’t tell you anything about whether you got a tax cut last year — but it may affect your attitude toward President Trump and his fiscal policies.

People who have received bigger refunds this year view the Republican tax cuts much more positively than those who have received smaller refunds or owed money, according to poll data analyzed by Ben Casselman and Jim Tankersley of The New York Times. And the same holds true for opinions about Trump himself: Bigger tax refunds translate into higher approval ratings for the president.

Millions of people have yet to submit their taxes, so the SurveyMonkey poll — which involved 4,073 respondents who had already filed their taxes — should be seen as a snapshot in time. But the findings nevertheless suggest that tax refunds are playing an important role in how people are evaluating both the president and the GOP tax cuts.

Casselman and Tankersley say that the decision by the Trump administration in early 2018 to reduce taxes taken out of paychecks right away could be backfiring. If the Treasury Department had allowed the tax cuts, which most workers benefited from, to show up as larger refund checks, millions more people would likely approve the tax law as they happily cashed their checks from the IRS. But smaller refunds may be having the opposite effect, hurting Trump politically.

Still, the tax season has several more weeks to go and support for the tax law is inching up, possibly because more people are realizing they benefited as they file their taxes. Half of the poll respondents said they approved of the GOP law, the highest level in over a year.

Individual Income Taxes Make Up Majority of Federal Revenue for the First Time

Income taxes paid by individuals made up the majority of federal revenue for the first time last year, according to an analysis released Wednesday by the Joint Committee on Taxation.

The chart below shows the upward trend for individual income taxes (blue line) as a share of federal revenue, which rose above 50 percent in fiscal year 2018.

Payroll taxes (green dotted line) have also risen as a share of federal receipts over time, from about 10 percent in 1950 to roughly 35 percent last year. More than two-thirds of U.S. households pay more in federal employment taxes (Social Security, Medicare) than they do in federal income taxes, The Wall Street Journal’s Richard Rubin noted.

Corporate taxes made up 6.2 percent of federal revenue in the 2018 fiscal year, tying 1983 for the lowest level in at least 50 years. The corporate share fell sharply from the 9 percent recorded in 2017 due the Republican tax law that slashed business rates.

For 2019, JCT expects the share of corporate taxes to rise a bit to 7 percent of federal revenues and individual income taxes to come in at 50 percent.

Quote of the Day: A ‘Paradigm Shift’ for Fiscal Policy

“[T]he recent prominence of MMT [Modern Monetary Theory] in the public debate is symptomatic of a broader paradigm shift away from discussions of fiscal austerity to a new mainstream view that fiscal policy should become a more active tool to stimulate growth, counter the global savings glut and address rising income and wealth inequality.”

– Joachim Fels and Andrew Balls of bond fund giant Pimco, in a new economic outlook cited by Bloomberg, which also just published A Beginner’s Guide to MMT

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