MANASSAS, Va. — President Obama, on a recent campaign trip through the crucial swing state of Virginia, recited an assertion he made again during Wednesday’s debate: that he has cut taxes for the typical American family by $3,600.
That is news to many voters — among them Don Woodson, a landscaper loading cases of soda into the back of a sport utility vehicle outside Costco last week.
“Where’s that at?’’ he scoffed. “We haven’t had any of that.’’
In fact, Woodson and his wife, Christine — parents of five children — most likely have shared in some of that tax cut. They just don’t realize it.
Like many Americans who are not tuned in to the details of tax policy and the endless Washington budget wrangling, the Woodsons were unaware of the income and payroll tax cuts Obama pushed through Congress that were designed to put extra cash in everyday Americans’ pockets and boost the economy. As a result, Obama is getting little credit for it, despite his statements on the stump.
Politically, it’s almost as if the tax cuts never happened.
“It’s fascinating that you can have a tax cut for 95 percent of the people, and not have them know it,’’ said Representative Richard Neal, a Democrat from Massachusetts and a member of the House Committee on Ways and Means, which oversees tax policy.
Now Obama is making a more determined effort to secure points for the cuts. To come up with his $3,600 figure, Obama squishes together $800 income-tax cuts that were in place in each of 2009 and 2010 as part of the economic stimulus package, along with an average $1,000 cut in payroll taxes that was in effect for both 2011 and 2012. The president’s statements often make it seem as though the $3,600 is the amount of annual tax reductions. That is not the case. Rather, it is the net reduction for a typical family making about $50,000, adding together the benefits over all four years.
“It’s a little cheating, and it’s a little right,’’ said Roberton Williams, a senior fellow at the nonprofit, nonpartisan Tax Policy Center in Washington. “It’s a four-year number. It’s not like you’re getting a $3,600 tax cut every year. It averages $900 a year. It’s still not chicken feed.’’
What makes these cuts least likely to have penetrated the consciousness of many voting Americans is their incremental nature. Obama trickled the benefits into paychecks every week instead of handing them out in a lump sum. So instead of getting $1,000 in tax credit all at once from the $115 billion cut in the payroll tax for example, workers paid $20 less in payroll taxes every week.
“I think they’re meaningless, because $20 a week doesn’t help anybody,’’ said another shopper at the Costco in Manassas, Daniel Winn, a retired marketing and sales executive. Like the Woodsons, Winn is supporting former Massachusetts governor Mitt Romney.
There are no current polling data measuring public awareness or approval of this set of tax cuts, although a CNN poll in February found that a 54 percent majority of Americans favored the payroll tax cut for 2012. A Reuters/Ipsos poll showed that the debate helped Romney cut into Obama’s lead when it comes to handling tax policy in general.
Opinions differ on the economic effect of the $20-a-week tax cut. Obama and his team believed the best way to boost the economy was to award the tax cuts piecemeal. Employees are less likely to squirrel away $20 a week in the bank, instead pumping it straight back into the economy by spending it. On the other hand, if they get $1,000 in a single check, the theory goes, they are more likely to stash the money in a savings account or use it to pay off debt — where its benefit to the economy is slow-acting.
Though in theory the trickle-out method is better for the economy in the short term, it certainly has not been as beneficial to the president’s reelection prospects. Neal compared the reductions to the cuts of 2001 and 2003, which President George W. Bush doled out to Americans in lump-sum payments. Studies have shown that taxpayers spent about a third of those payments, another third wound up in savings, and another third was used to pay off debt.
“Back with Bush, when you got the check, you knew something had happened,’’ said Neal. Many Americans also don’t understand that, with Obama’s support, those Bush tax cuts were extended in 2010 for two years and that estate tax cuts also were renewed during Obama’s first term, said Neal.
Some Obama supporters blame the messengers.
“The people surrounding Obama, and Obama himself, have done a horrible job of explaining the good things he has done for the American people,’’ said Robert Chase, the sales manager of a rare and used bookstore in Manassas.
How many Americans know, he asked, that Obama won provisions in the stimulus act giving tax credits to first-time homebuyers and middle-income parents putting children through college? Chase contends Obama’s failure to convey these initiatives to swing voters in such places as Virginia has allowed Romney and conservative political groups like Americans for Prosperity and American Crossroads to paint Obama unfairly. Americans for Prosperity has bused supporters into Manassas to leaflet neighborhoods, he said. Asked to comment on Obama’s tax cuts, the Romney campaign e-mailed a statement highlighting the former Massachusetts governor’s charge that Obama has raised taxes 19 times in his first term. The first was a cigarette tax hike of 61 cents a pack. The remaining 18 are tax increases contained in Obama’s sweeping health care overhaul of 2010, as counted by the conservative Heritage Foundation.
“The president’s tax increases will not make the next four years any better than the last — they will only stifle growth and job creation,” Romney spokesman Ryan Williams said.
Obama’s payroll tax cut had a short shelf life, and Congress must decide before the end of 2012 whether to extend it once again. By ending that tax cut, the government would resume collecting the $115 billion annually that is supposed to be going into the Social Security trust fund. Yet the prospect of taking that money back from taxpayers next year highlights the difficult decisions facing political leaders in the lame-duck session after the election. Expiring tax cuts are part of what specialists and politicians are calling Washington’s “fiscal cliff,’’ a confluence of negative economic events that could plunge the nation back into recession.
If the payroll tax, the Bush tax cuts, estate tax cuts, and other tax benefits are all permitted to expire on schedule at the end of the year, then collectively Americans face an average tax increase of $3,446 in 2013, according to the Tax Policy Center.
And that’s just one year, not spread over four.Christopher Rowland
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