Tax Reform Study Report The Winston Group 101 Constitution Ave. NW, Suite 710 East Washington, DC 20001 www.winstongroup.net
Table of Contents Overview and Key Findings 3 Economic Outlook 4 Strategic Situation 4 Expectations of the Legislative Environment 5 General Outlook on Tax Reform 6 Personal Outcomes of Tax Reform 7 Context for Tax Reform 10 Inevitability of Taxes Going Up 10 Reaction to Specific Tax Policies 11 Business Tax Reform 12 Beliefs 12 Keeping Companies in the US vs. Coming Back from Overseas 13 Message Contrasts Related to the Wealthy and Corporations 15 Consequences If Tax Reform Does Not Pass 15 Political Consequences 15 Economic Status Quo 16 Conclusion 17 Methodology 17 Appendix 18 Personal Outcomes of Tax Reform, Ranked from Most to Least Positively Impactful 18 Beliefs about Tax Reform, Ranked from Most to Least Believed 19 Tax Reform Policies, Ranked from Most to Least Helpful 24 2
Overview and Key Findings Recent research on tax reform shows that about half of the electorate (50%) considers themselves living paycheck to paycheck in their personal financial situations, and in the focus groups, those who were in that kind of financial situation acknowledged that living in this way was not good for my future. Given the current financial outlook and belief system about taxes, the most effective value proposition for tax reform is the direct impact that tax reform and lower taxes can have in their personal lives, helping individuals have more income to be able to manage their own financial situations especially in relation to cost of living and saving/ investing for retirement. Cost of living continues to be a significant challenge for many Americans, and a majority considers taxes to be part of their cost living expenses, meaning that lowering taxes through tax reform is a way that Congress can help provide people with relief from cost of living. In addition to cost of living being an ongoing challenge that is compounded by stagnant wages, there is also a sense of the inevitability of taxes continuing to go up. Unless something is done to change that trajectory, they feel their taxes will continue to rise as government has no other recourse but to tax people more. The electorate s confidence in Republican handling of economic issues is better than health care. Republicans lead on the economy, jobs and taxes, while trailing on health care, giving Republicans better standing going into tax reform. Among both Republicans and independents, there was some measure of disappointment at the perceived lack of legislative accomplishments so far this year. While they were hopeful about tax reform and saw its potential benefits to them, they were not sure if Republicans will be able to get it done. While focus group discussions in Pittsburgh focused more on the personal side of tax reform than the business aspects, they did acknowledge that addressing business taxes was an important step toward improving the nation s economy and had potential benefits to them personally. They were more inclined to believe that lowering the would help keep businesses here, but because of the appeal of cheap labor overseas, were not fully convinced it would completely solve the problem of relocating overseas. Moreover they were not convinced that businesses already overseas would come back even if the business tax rate was significantly lower. However this would definitely be helpful toward improving the economy and keeping businesses here in the US. In terms of consequences if tax reform does not pass, there were two-fold consequences. The first potential consequence was political in nature, with the possibility of the midterms not going well for Republicans. The second and potentially more sobering consequence is the negative impact on the economy, as the result was described as the status quo. Voters believe that if nothing is done, their taxes will continue to go up and businesses will continue to leave the country. If the economy continued as status quo over the next year, voters would find that to be an unacceptable scenario. The mandate in the 2016 election was clearly about change, and for Republicans to become identified with the status quo would be extremely concerning going into the 2018 midterm elections. However, given the slight advantage Republicans have on issue handling of the economy, jobs and taxes, there is a positive context for them to present their ideas on tax reform. 3
Economic Outlook Living paycheck to paycheck is not good for my future. About half of the electorate (50%) considers themselves living paycheck to paycheck in their personal financial situations. Among lower and middle income groups, the numbers are even higher (83% among 15-30K; 54% among 30-50K; 48% among 50-75K; 60% among those with some college/associate degree). For those in the focus groups who were living paycheck to paycheck, they wanted the ability to get ahead particularly with retirement savings and managing cost of living. As one independent voter in Pittsburgh stated, living paycheck to paycheck is not good for my future. As a result, the overall electorate has a lukewarm outlook about the direction of the economy (44-39 right direction-wrong track), but Republicans (78-13) are much more positive about how the economy is going than independents (34-43) or Democrats (20-60). When asked about their priority issues, taxes emerged as part of economic concerns during the focus groups. The economy was seen as generally stable but not progressing, and the job market seemed flat. Independent: I know my stocks and my 401K, they re on the rise right now, so that s a good thing. But I don t trust in it. I don t have hope that that s going to hold on until my retirement date. I think we need more. To create more jobs. Republican: Stable. The stock market s doing well, but the job market s been pretty much flat. Strategic Situation Given the recent legislative focus on the ACA, health care (28%) is on par with economy/jobs (23%) as a top issue, but this is in large part due to the recent heightened attention toward it. Even though the two issues are currently on par with one another in importance, there is a significant difference in the electorate s confidence in Republican handling of economic issues over health care. Republicans lead on economy (+8), jobs (+7) and taxes (+4) while trailing on health care (-12), a situation that gives Republicans a slight advantage going into tax reform. Issue handling R-D Margin Economy 45-37 +8 Jobs 44-37 +7 Taxes 43-39 +4 Health care 35-47 -12 4
This is true for independents and middle income voters as well. Although larger shares of independents were undecided as to which party they would trust, they also indicated they had more confidence in Republicans to handle economic issues. In fact, Republicans had larger leads on economy (+13), jobs, (+9), and taxes (+12) among independents than among voters overall. Middle income voters tended to have similar views to the overall electorate. Issue handling (R-D) Independents $30K-$50K $50K-$75K Economy 39-26 46-34 48-39 Jobs 36-27 45-32 47-38 Taxes 39-27 45-36 48-38 Health care 22-43 39-42 38-47 Expectations of the Legislative Environment We thought things were starting to get done with them controlling everything, the Republicans; but evidently, there s polarization even within the Republican party. So now, nothing s getting done. Both the independent and Republican groups expected more of the same and business as usual for the legislative environment and Republican majority. Infighting would likely continue and not much would be accomplished. However, when asked what could cause them to feel the country is moving in the right direction, tax reform was among the issues mentioned. Reflecting the legislative environment so far this year, the focus groups were not confident tax reform would be passed. Republican: I think tax reform is probably the most realistic and important part in economic growth in the next two years, but health care reform is a very close second. Independent: We thought things were starting to get done with them controlling everything, the Republicans; but evidently, there s polarization even within the Republican party. So now, nothing s getting done. So, I just think it s probably going to be the status quo. It s just going to be a continuation of this it s just going to be a continuous decline. Independent: I don t see anything really changing. It s just going to remain status quo and there s going to be division and fighting and lobbying and stopping things and nothing s going to get really done. Independent: That s what I thought would happen when they controlled the House, the Senate, and the White House. Wow, things are getting passed, whether in our best interest or not, but things are going to get passed. But, they can t even get anything passed. 5
Republican: I don t think there s going to be any legislation done, even though the Republicans pretty much own it. But, it seems like everybody s so dead-set; nobody s willing to give up an inch either way, and I don t think you can get anything decent accomplished that way. General Outlook on Tax Reform The compelling reason [for tax reform] is for us not to pay so much in taxes. Throughout the qualitative discussions, there was a positive view of what could happen with tax reform and people were supportive, but there was almost equal concern and questions about the government s use of revenue from tax reform and what will be done with the money. Both the independent and Republican groups wanted pro-growth tax reform that would generate more prosperity for the country, but at the same time, wanted increased responsibility from the government in the use of those revenues. They were not interested in simply giving government more money to spend. Independent: At the end of the day, all my money s going everywhere. I'm not seeing anything being done with it. I d like to see my money so I can prosper and my family can prosper. Independent: Make the people more prosperous with their own money. And make the government more responsible for theirs. Independent: Growth in our economy. Bringing back more manufacturing, more jobs, more in general. There s more money being made, there s going to be more taxes paid by everybody. So, growth in the economy. Republican: I think if you lower the tax rate, there d be more jobs, probably. I just think lower taxes would help anybody. We asked participants about what they felt was the most compelling reason for tax reform. The basic answer was for us to not pay so much in taxes. They wanted to be able to keep more of their earnings, to be able to spend more in the economy or invest in their and their families future. Republican: The compelling reason is for us not to pay so much in taxes. Republican: Honest to God, you look at your paycheck, and you look at how much you make, and then you look at how much you take home. Republican: I think the compelling reason would be if there s more money in all our pockets, we re probably going to spend more money. We re going to buy more products, we re going to invest, maybe, we re going to buy a new car because that keeps things moving. 6
Personal Outcomes of Tax Reform Put more of my money that I earn into my future as opposed to into my government. Given the current belief system about taxes, tax reform should be presented as providing people with the ability to do more in their own personal lives and to help them achieve their goals, such as by giving them more income to manage cost of living or save for retirement. The approach should be how tax reform can help the voter and improve their lives, from the perspective of living day to day in their shoes. As a standalone, tax reform is a moderate priority, but in its ability to impact the economy, jobs and wages, it is a huge priority. The personal impact of tax reform and what it can do in people s lives will be very important in defining the value proposition of a tax reform plan. In the focus groups, participants were shown a possible list of outcomes that could result from tax reform and asked to discuss how they believed each could impact them, with the outcomes list ranging from better opportunities for jobs to very personal household-level outcomes such as greater ability to save for retirement and reduction in your cost of living. In terms of those personal outcomes, they were not fully certain tax reform would achieve those outcomes, but felt it would definitely help and they would be better off. Moderator: Do you think tax reform can accomplish those [priorities]? Republican: I think mainly in business, I think, mainly have lower tax rates. They ll be more competitive, there ll be more. I think they have to, number one, lower business tax rates and then, I think, all these things will fall into place. Independent: If there s more money in the economy, then hopefully it would spread and therefore I would maybe have more money that way. Nevertheless, the outcomes that were most important to the groups included greater ability to save for the future and retirement, especially among middle aged and older individuals; reduction in cost of living; increase in personal income; creating, better opportunities for jobs; reducing the cost of products and services; and making the wealthy and corporations pay their fair share. Independent: Put more of my money that I earn into my future as opposed to into my government. Independent: If I m going back to the repatriation of this money coming in, you re going have more competition among companies within this country, which would bring down the cost of certain products and services. Given economic concerns that emerged in the qualitative discussions, the survey evaluated a list of outcomes that could result from tax reform and asked voters to determine how much each one could positively impact them at a personal level. All were important, but the top two were increase 7
in your personal income and reduction in your cost of living. This was true for Republicans, Independents, and middle income voters, with some variation in which was the top priority and which was the second (see Appendix). Independent: I think it would help with increasing your personal income. Less tax I have to pay is more in my pocket. Republican: I have reduction in cost of living because I think that just automatically trickles down and gives more money in your pocket. Possible Outcomes from Tax Reform and Lower Taxes (scale of 1-9 with 1 being an outcome that would not positively impact you at all, 9 being an outcome that would positively impact you a great deal) Overall Mean Paycheck to Paycheck Mean An increase in your personal income 7.52 7.64 Reduction in your cost of living 7.49 7.68 Reduction in the cost of products and services 7.20 7.30 Greater ability to save for the future and retirement 7.04 7.18 6.97 6.95 Better opportunities for jobs 6.76 7.04 Making America s economy more competitive 6.76 6.64 Making the wealthy and corporations pay their fair share 6.56 6.74 Simplicity of filling out a tax return 6.14 6.09 Increase revenues to balance the budget 6.06 5.97 For voters who felt they are living paycheck to paycheck, the list of priorities was similar to voters overall. However, the majority of the items were an even greater priority for those who say they are living paycheck to paycheck, with slightly higher ratings on all but four of the items (creating, increase revenues to balance the budget, making America's economy more competitive, and simplicity of filling out a tax return). With the possible exception of simplicity, most of the items that were rated slightly lower among this group are big picture concepts rather than the more direct and personal items. For these voters, a reduction in your cost of living was the priority item (7.68), followed closely by an increase in your personal income (7.64). The largest gap between these was on better opportunities for jobs which the paycheck to paycheck group prioritized.28 points higher than voters overall. While cost of living, cost of products and services, and personal income made the top three, greater ability to save for the future and retirement was also an important item on the list. In focus groups, this issue was clearly underlying the other concerns; having more income or fewer immediate costs was seen as a prerequisite in order to be able to save for retirement, a goal that currently seemed out of reach to many. Many participants worried that they would not be able to retire when they expected or at all. 8
Independent: Greater ability to save for the future and retirement is right now staring me in the face and I have trouble. I m always going to the HR person once a year we get to decide what we re going to put, and I m like, Well I really want to put the max, but I don t think I can live if I put the max in. I m thinking now I m probably going to retire at age 97 or something like that. I can t really afford to invest as much in my retirement because I m living paycheck to paycheck as it is. When discussing the outcome of making the wealthy and corporations pay their fair share, the focus groups mindset tended to be, The more you make, the more you should pay. Even some Republicans mentioned this as a desired goal of tax reform, in that the middle class has the most burden. When discussing the wealthy, Republicans did not think strictly in terms of income levels, but seemed to also imply ideological differences related to liberal elites like actors and prominent corporate figures, who are seen as pushing their agenda. Republicans perception was that many wealthy individuals were not paying their fair share of taxes and were using their wealth to aggressively push their liberal agendas including the idea that Americans should pay more in taxes, while the middle class was making up the difference in the tax burden. Republican: If they pay something on every dollar they made, it would be a lot more because, in a lot of cases, they aren t paying anything. How about Warren Buffett? The biggest cheerleader that says, I should pay more. His company didn t pay taxes for seven years. Republican: It s a Democratic view, making the wealthy pay more, I really don t know how much they pay, but I think they should pay more. But then, you could look at it as, well, they created corporations and all, so they deserve what they get. So, there s a big argument with that. It s a tough topic, but the middle class, I think we do pay most of everything. We have the most burden. The survey explored further who voters meant by the wealthy. Respondents were asked to define what income level they would consider made someone wealthy or super wealthy in America. Although there were a range of responses, the general consensus was that the wealthy are those who make around $300-500K in annual income, and the super wealthy are those who make $1-2 million in annual income. Based on qualitative discussions about goals for tax reform, simplicity was an important and desirable goal that should be encouraged as part of any tax reform plan, but of the list of outcomes, simplicity of filling out a tax return was generally viewed as least important in the context of other potential outcomes, such as the ability to save for retirement and increase in incomes. While some complained about the time and effort it took to complete tax forms, others said that simplicity was already available for them because of tools such as TurboTax. Independent: We do TurboTax. And I don t feel like we have a lot of deductions to mark off and things like that. So, it seems pretty simple. 9
Context for Tax Reform It seems the only resolution when there s a problem is to tax. In the discussion about these topics, two concepts emerged: the impact of cost of living and the inevitability of taxes and other costs going up. Of the sequence of statements related to tax reform on the survey, those that were most believable related to things voters themselves could do with the additional money from tax relief (especially relative to the cost of living), and the inevitability of taxes continuing to go up if nothing is done. A complete list of statements, with responses for Republicans, Independents, and middle income voters, is available in the Appendix. The Impact of Cost of Living Rising cost of living has been an ongoing challenge for many people for several years, and this problem has been compounded by stagnant wages. As a result, many people particularly middle income Americans have additional challenges with saving and planning for retirement, and for some, retirement is not a possibility. In terms of the relationship of taxes to cost of living, most voters (80%) said that they that would consider taxes to be part of their overall cost of living expenses such as health care and utility costs. Since voters consider taxes as part of their cost of living, lowering taxes is a way that Congress can directly help provide relief with cost of living. Of all the statements presented on the survey, the three most-believed were related to cost of living. About three-quarters believed, more money in their pocket to help them manage cost of living, (74-11 believe-do not believe, 37% strongly believe). Seven in ten believed, If you have more money in your account instead of paying that money toward taxes, it will help you with cost of living, (71-10 believe-do not believe, 40% strongly believe). Another 71% believed, relief with cost of living, (71-12 believe-do not believe, 36% strongly believe). Inevitability of Taxes Going Up Voters tended to believe that taxes will continue to increase inevitably if no action is taken. Almost seven in ten believed the statement, taxes will keep going up for everyone (69-12 believe-do not believe, 38% strongly believe). A similar share believed that, If nothing is done, American families will pay higher taxes next year (69-12 believe-do not believe, 37% strongly believe). In both cases, only 12% indicated they did not believe the statement. When asked to discuss the first statement ( takes will keep going up for everyone ), both groups believed this statement, saying the only resolution the government seems to have is to tax people more. 10
Independent: It has to reach a point of saturation because you can t just tax at 100%. But we re not at that point yet and it seems the only resolution when there s a problem is to tax. They don t know how to tighten their own purse strings, but it s always easy to tax us. However, voters less strongly believed the statement Tax reform would lead to lower taxes for everyone, including people like me, than the previous two (50-23 believe-do not believe, 22% strongly believe). Although the groups tended to believe this statement, most cast it in a hopeful light, and were not convinced it was a certainty. They admitted they had not yet heard any specific tax reform politics that had been proposed, so while the idea that tax reform could directly lower taxes for them was believable, without confirmation what specific policies would achieve this, it remained more aspirational. Reaction to Specific Tax Policies In the focus groups, respondents were shown a list of specific tax policies that have been proposed. The policies that generated the most positive reaction were doubling standard deductions, reducing the number of tax rates, and changing tax rates for individual-owned small businesses. In the Republican group, there was more interest in lowering the corporate rate than in the independent group which focused mostly on the personal side. Republican: I think small businesses would put it back into their business. Republican: You either grow the business or you return it to shareholders. Either way, that pumps money back into the US economy. In the survey, voters were asked to rate a list of potential policies based on how helpful they thought each would be to them personally. Although doubling the standard deductions, reducing the number of tax rates, and changing tax rate for small business also emerged as the top policies for the electorate, there was not one policy that generated a particularly positive response, as voters lacked some context for understanding their personal impact. Tax Reform Policies (1-9 scale, 1 being that the policy would not help you at all and 9 being it would be very helpful to you) Doubling the individual standard deduction from $6,300 to $12,000 for single filers and $12,000 to $24,000 for joint filers Reducing the number of individual tax rates from 7 to 3, with rates being 12%, 25% and 33% Changing the federal tax rate for small businesses so the maximum rate on small businesses would not exceed the rate for large corporations Overall 6.44 5.79 5.62 Only taxing half of personal capital gains income 5.32 Eliminating the estate tax 5.19 11
Tax Reform Policies (1-9 scale, 1 being that the policy would not help you at all and 9 being it would be very helpful to you) Overall Reducing the top individual federal income tax rate from 39.6% to 33% 5.08 Eliminating all personal federal except mortgage interest and charitable contributions, accompanied by lower tax rates, but this would not include deductions for state and local taxes Eliminating all personal federal except mortgage interest and charitable contributions, accompanied by lower tax rates. Reducing the from 35% to 20% while eliminating most corporate 5.01 4.98 4.88 Middle income voters, Republicans, and Independents tended to have similar priorities to voters overall, and while doubling the standard deduction, reducing the number of individual tax rates, and changing the federal tax rate emerged as the top proposals for them as well, there was no one policy that was particularly helpful for these voters either (see Appendix). Business Tax Reform The complexity of the tax code and the heavy business taxes that cause us to go overseas, again, that is just a detriment to this country. Everybody benefits at all levels if it s all brought back here. The business side of tax reform was seen as having a positive impact, particularly in terms of helping keep jobs here in the US. However, in terms of what people were looking for from tax reform, the personal side was what respondents tended to focus on more, as they could see the impact on their lives and financial situations. Beliefs As to business taxes as they currently stand, 52% believed the statement, The US has the highest in the world (52-17 believe-do not believe). Most in the Republican group believed this (as did 68% of Republicans on the survey) and were already aware this was true. Republican: Absolutely true. And, that s why Apple keeps the majority of its money overseas, even though it s the largest company in the country and could very easily appropriate that money. More strongly believed was the statement, the world, costs are being passed onto consumers (68-11 believe-do not believe, 38% strongly believe). Most believed this, but a dual interpretation emerged in the discussion of this statement. Some interpreted this as I am paying more in taxes because companies are outsourcing and the wealthy don t pay their fair share. Others interpreted this as the costs of products and services 12
being passed onto them as a result of the being too high. In either interpretation, the concept of costs being passed on to consumers is believable. Independent 1: I think we re paying higher taxes because we need to make up for the loss that s going out of the country. Independent 2: I agree. That s exactly what I was going to say. I feel like the money s going elsewhere. So, to make up for it, they have to tax us more. As to the impact of the tax code on businesses decisions to stay in or leave the US, 60% believed the statement The tax code is one of the biggest reasons businesses move outside the US (60-16 believe-do not believe, 29% strongly believe). Both focus groups agreed that the tax code incentivizes or discourages business practices. Independent: The complexity of the tax code and the heavy business taxes that cause us to go overseas, again, that is just a detriment to this country. Everybody benefits at all levels if it s all brought back here. Republican: 110% true. Anybody that dabbles or invests in the stock market can tell you that businesses in this country are at a huge disadvantage as opposed to businesses abroad. Independent: I think we do need to do something about the corporate money leaving, too. And we do, even though it seems unfair to reduce taxes on the rich and wealthy, they are the ones that are creating jobs. Keeping Companies in the US vs. Coming Back from Overseas Both groups attributed businesses relocating overseas to both the tax code and cheap labor, with the Republican group describing cheap labor as even more of an incentive for moving overseas than the tax code. They saw the tax code as an important part of the problem, but not the only problem. Therefore, lowering the corporate rate will be a deterrent to businesses leaving and very helpful to keeping jobs and companies here ( they are less likely to jump ship ), but they do not think it will completely solve the problem, as cheap labor will continue to be a draw for companies to move. Additionally, neither group was convinced that businesses that are already overseas would return to the US. While voters strongly believed, taxes would help keep companies here in the US (64-15 believe-do not believe, 31% strongly believe) and, If nothing is done, businesses will continue to leave the country (66-12 believe-do not believe, 35% strongly believe), they less strongly believed the statement, taxes would help businesses to come back from overseas (56-21 believe-do not believe, 26% strongly believe). Republican: Right now, every business has the opportunity to move, so they would if nothing happens. But I don t think [tax reform] would have a real, major effect on businesses moving. Republican: I think it s very hard for companies to make money overseas and then keep jobs here when it can all be streamlined over there. I think if there s more of a synergy on the financial side, they re less inclined to just jump ship entirely. 13
Independent: I think it might stimulate the companies to stay here or to open here. I don t think it s going to bring any company that s making lots of money overseas back with the tax break. Independent: As long as we can produce goods and services in other countries where that labor bottom line is going to be lower than what we can accomplish here, things aren t going to change. In terms of the personal impact of reducing business rates, focus group participants tended to believe this would result in more jobs or higher wages, and believed the statement, If business taxes were lower, this would create, create better opportunities for jobs, income, and wages (54-22 believe-do not believe, 26% strongly believe). A similar share believed, If business taxes were lower, this would create, stocks and investments to grow and help people save and invest for their future and retirement (53-21 believe-do not believe, 26% strongly believe). Republican: My company s best clients are the ones that are very, very wealthy and very rich, and any time that they re more inclined to make a big check out to us, if they have a big check coming in. Independent: I think lower taxes could potentially create more jobs. You asked about raising their wage as well? That I m not sure about. I think it could, potentially. I don t think it s going to be a quid pro quo, like cutting some of the taxes means all that money is getting put into people s pockets and creating more jobs. At the end of each session, we asked participants to discuss the individual side versus business side of tax reform, and which would have the greater impact on them. Independents focused much more on the individual side, in some part because of the industries in which they were employed. Their view tended to be that, unless they were employed in a large business, this policy change would not directly affect them, while the individual side of tax reform would impact everyone. However, they did see benefits of the corporate side even if they were not employed in a large business, especially through growth of stocks/investments and through indirect benefits of. Republicans were more focused on the business side, where they saw the potential for. When asked how they would present tax reform to others, however, they said they would emphasize the individual side more than the corporate aspects. Independent: I think, again, going back to my retirement investments, because that s weighing on my mind these days, the business side of it would benefit me because my investments are in corporate and in businesses. Republican: I would talk the personal because most people don t have knowledge of the business tax code and what s involved. Republican: What it would come down to would be, How would this affect your kids? Your grandkids? 14
Message Contrasts Related to the Wealthy and Corporations The survey tested a series of potential message contrasts against a Democratic message about tax breaks for the wealthy and corporations. Not unexpectedly, each one drew a partisan response from the electorate, but with large percentages of undecided among independents. However, the message that was most effective for Republicans against the criticism of tax breaks for the wealthy and corporations was about closing loopholes for a fairer system (44-42 R-D among voters overall, with 14% undecided; 40-36 R-D among independents, with 24% undecided; 44-40 R-D among voters making $30K-$50K with 16% undecided; and 46-40 among voters making $50K-$75K with 14% undecided). Who do you agree with more? Overall Ind $30K-$50K $50K-$75K Democrats who say the Republican tax reform plan will give tax breaks to the wealthy and large corporations Republicans who say their tax reform plan will lower taxes for individuals and pay for it by closing tax loopholes. This will make the tax code fairer while also helping the economy grow. 42 36 40 40 44 40 44 46 When the focus is on the wealthy, particularly in partisan situations, then the statement about addressing the situation through closing loopholes for a fairer system is effective. However, in terms of discussions about the value of a tax reform plan and what it will do, the focus should remain on how it impacts the average person, particularly in light of giving them more income, helping with cost of living, and ability to save for retirement. Republican: Anytime I think you have the amount of loopholes that we have and if you have the money to have a good tax lawyer, and if you're really, really rich, yeah. You can get by without paying much of anything. I think people in the middle are the ones who get hit the most. Consequences If Tax Reform Does Not Pass It will be the status quo. In the focus groups, we asked participants about consequences if tax reform is not passed. Political Consequences There were two major consequences that emerged, the first being political consequences for Republicans in 2018. 15
Republican: I think the way this dysfunctional Congress is going, it s kind of difficult to see anything really big get passed. That being said, the consequences would be in the midterms in 18, you may see a really big change in things. And, even more so, at the end of four years. Republican: Yeah, I think Congress is responsible. I guess I m not optimistic that the Republicans are going to close ranks because they actually could do most of these things without anybody else. Voters are split as to who they say would be most responsible if tax reform does not pass, with 29% saying Congressional Republicans and 31% saying Congressional Democrats. Some 17% say they would blame President Trump. By party, Republicans would blame Democrats in Congress, and Democrats would blame Republicans in Congress and President Trump. Independents were split, with 29% blaming Republicans in Congress, 25% blaming Democrats in Congress, and 20% blaming President Trump. If tax reform is not passed, who is most responsible for this legislation not being passed? Overall GOP Ind Dem Republicans in Congress 29 18 29 39 Democrats in Congress 31 52 25 16 President Trump 17 10 20 21 Other 6 7 8 3 Don t Know 17 12 19 21 By income, voters making between $30K and $50K would blame Democrats in Congress first (44%), then Republicans in Congress (24%). Some 16% would blame President Trump. Among those making between $50K and $75K, 28% would blame Republicans in Congress and 26% would blame Democrats. Another 16% would blame President Trump, with a larger share (24%) indicating they did not know who they would blame. Economic Status Quo A second major consequence identified in the groups is that the economy may suffer, and the consequence is the status quo. As previously discussed, voters believe that if nothing is done, their taxes will go up and businesses will continue to leave the country, so the status quo is not an acceptable economic situation that should be allowed to continue. Republican: It will be the status quo. Republican: I think one consequence, too, besides the election, they re going to blame it all on Republicans and Trump, probably Congress more. The consequence is our economy. Right now, it s pretty good, or stable, or whatever you want to say because a lot of businesses are looking at this and, I think, they re looking at it hopeful. And, if it falls, I think there s going to be another consequence, too. 16
When asked on the survey whether the economy continuing as status quo over the next year would be acceptable or not, voters found that scenario unacceptable (40-47 acceptable-not acceptable). Independents would find that particularly unacceptable (33-50), and key middle income groups would also find this to be unacceptable (30-50K, 41-46; 50-75K, 42-48). Given that the 2016 election was clearly about change, for Republicans to become identified with the status quo would be extremely concerning going into the 2018 midterm elections. Conclusion As the survey and focus group data findings show, tax reform is an important item on the legislative agenda, despite the recent attention on health care, and voters would not be satisfied if the economy continued next year as it is this year. Although voters are not satisfied with the economic status quo, Republicans have a slight advantage on issue handling for the economy, jobs, and taxes, giving them a positive context in which to present their ideas on tax reform. The key aspect will be to communicate how these ideas will positively affect the daily lives of voters. While aspects related to business were seen positively, the greater positive response was for outcomes with a more direct impact on the individual, such as an increase in personal income or a reduction in cost of living. The most effective value proposition for the electorate, then, is the direct impact that tax reform and lower taxes can have in their personal lives. Methodology This document summarizes the findings from a recent national survey on tax reform of 1000 registered voters, conducted July 25-26, 2017, and qualitative research among independent and Republican voters in Pittsburgh conducted July 20, 2017. 17
Appendix Personal Outcomes of Tax Reform, Ranked from Most to Least Positively Impactful Rank Overall Republicans Independents $30-$50K $50-$75K 1 An increase in your personal income (7.52) Reduction in your cost of living (7.79) An increase in your personal income (7.44) Reduction in your cost of living (7.67) An increase in your personal income (7.68) 2 Reduction in your cost of living (7.49) An increase in your personal income (7.75) Reduction in your cost of living (7.39) An increase in your personal income (7.61) Reduction in your cost of living (7.46) 3 Reduction in the cost of products and services (7.20) (7.49) Reduction in the cost of products and services (7.15) Reduction in the cost of products and services (7.07) Reduction in the cost of products and services (7.41) 4 Greater ability to save for the future and retirement (7.04) Reduction in the cost of products and services (7.45) Greater ability to save for the future and retirement (6.93) Better opportunities for jobs (6.94) Greater ability to save for the future and retirement (7.15) 5 (6.97) Making America s economy more competitive (7.39) (6.71) (6.93) (7.15) 6 Better opportunities for jobs (6.76) Greater ability to save for the future and retirement (7.33) Better opportunities for jobs (6.48) Making America s economy more competitive (6.92) Better opportunities for jobs (6.82) 7 Making America s economy more competitive (6.76) Better opportunities for jobs (7.15) Making America s economy more competitive (6.47) Greater ability to save for the future and retirement (6.80) Making America s economy more competitive (6.70) 8 Making the wealthy and corporations pay their fair share (6.56) Simplicity of filling out a tax return (6.60) Making the wealthy and corporations pay their fair share (6.39) Making the wealthy and corporations pay their fair share (6.54) Making the wealthy and corporations pay their fair share (6.47) 9 Simplicity of filling out a tax return (6.14) Increase revenues to balance the budget (6.26) Simplicity of filling out a tax return (5.94) Increase revenues to balance the budget (6.08) Simplicity of filling out a tax return (6.29) 10 Increase revenues to balance the budget (6.06) Making the wealthy and corporations pay their fair share (6.18) Increase revenues to balance the budget (5.77) Simplicity of filling out a tax return (6.02) Increase revenues to balance the budget (5.94) 18
Beliefs about Tax Reform, Ranked from Most to Least Believed Rank Overall Republicans Independents $30-$50K $50-$75K 1 more money in their pocket to better help them manage cost of living (Total: 74, Strongly: 37) more money in their pocket to better help them manage cost of living (Total: 87, Strongly: 52) If you have more money in your account instead of paying that money toward taxes, it will help you with cost of living (Total: 69, Strongly: 35) more money in their pocket to better help them manage cost of living (Total: 79, Strongly: 43) If you have more money in your account instead of paying that money toward taxes, it will help you with cost of living (Total: 75, Strongly: 41) 2 If you have more money in your account instead of paying that money toward taxes, it will help you with cost of living (Total: 71, Strongly: 40) relief with cost of living (Total: 84, Strongly: 51) more money in their pocket to better help them manage cost of living (Total: 67, Strongly: 31) relief with cost of living (Total: 76, Strongly: 44) relief with cost of living (Total: 75, Strongly: 37) 3 relief with cost of living (Total: 71, Strongly: 36) taxes will keep going up for everyone (Total: 83, Strongly: 51) American families will pay higher taxes next year (Total: 66, Strongly: 31) the ability to save and invest more for their future and 74, Strongly: 38) more money in their pocket to better help them manage cost of living (Total: 74, Strongly: 37) 4 American families will pay higher taxes next year (Total: 69, Strongly: 37) taxes would help keep companies here in the US (Total: 83, Strongly: 49) relief with cost of living (Total: 66, Strongly: 28) If you have more money in your account instead of paying that money toward taxes, it will help you with cost of living (Total: 73, Strongly: 44) the world, costs are being passed onto American consumers (Total: 72, Strongly: 37) 5 taxes will keep going up for everyone (Total: 69, Strongly: 38) the ability to save and invest their money for their future, and not in their government (Total: 83, Strongly: 44) the ability to save and invest their money for their future, and not in their government (Total: 65, Strongly: 26) taxes will keep going up for everyone (Total: 73, Strongly: 42) the ability to save and invest their money for their future, and not in their government (Total: 66, Strongly: 30) 19
Rank Overall Republicans Independents $30-$50K $50-$75K 6 the ability to save and invest their money for their future, and not in their government (Total: 68, Strongly: 32) If you have more money in your account instead of paying that money toward taxes, it will help you with cost of living (Total: 82, Strongly: 55) business will continue to leave the country (Total: 64, Strongly: 32) American families will pay higher taxes next year (Total: 73, Strongly: 40) American families will pay higher taxes next year (Total: 70, Strongly: 37) 7 the world, costs are being passed onto American consumers (Total: 68, Strongly: 38) the world, costs are being passed onto American consumers (Total: 82, Strongly: 52) the ability to save and invest more for their future and 63, Strongly: 28) the ability to save and invest their money for their future, and not in their government (Total: 73, Strongly: 39) taxes will keep going up for everyone (Total: 69, Strongly: 38) 8 the ability to save and invest more for their future and 67, Strongly: 33) business will continue to leave the country (Total: 82, Strongly: 50) taxes will keep going up for everyone (Total: 62, Strongly: 35) Businesses staying here in the US would help stocks and investments to grow which would help people save and invest for their future and 72, Strongly: 32) business will continue to leave the country (Total: 67, Strongly: 33) 9 business will continue to leave the country (Total: 66, Strongly: 35) Businesses staying here in the US would help stocks and investments to grow which would help people save and invest for their future and 81, Strongly: 45) the world, costs are being passed onto American consumers (Total: 62, Strongly: 33) taxes would help keep companies here in the US (Total: 71, Strongly: 33) taxes would help keep companies here in the US (Total: 67, Strongly: 33) 20
Rank Overall Republicans Independents $30-$50K $50-$75K 10 Businesses staying here in the US would help stocks and investments to grow which would help people save and invest for their future and 64, Strongly: 28) the ability to save and invest more for their future and 80, Strongly: 47) Businesses staying here in the US would help stocks and investments to grow which would help people save and invest for their future and 60, Strongly: 21) the world, costs are being passed onto American consumers (Total: 70, Strongly: 43) Businesses staying here in the US would help stocks and investments to grow which would help people save and invest for their future and 66, Strongly: 26) 11 taxes would help keep companies here in the US (Total: 64, Strongly: 31) taxes would help businesses to come back from overseas (Total: 79, Strongly: 45) taxes would help keep companies here in the US (Total: 59, Strongly: 25) business will continue to leave the country (Total: 68, Strongly: 37) the ability to save and invest more for their future and 65, Strongly: 29) 12 the world, I am paying more for the costs of products and services (Total: 62, Strongly: 31) If Congress does not act on tax reform, businesses will continue to leave the country (Total: 79, Strongly: 43) The tax code is one of the biggest reasons businesses move outside the United States (Total: 58, Strongly: 25) If Congress does not act on tax reform, businesses will continue to leave the country (Total: 67, Strongly: 33) the world, I am paying more for the costs of products and services (Total: 62, Strongly: 30) 13 The tax code is one of the biggest reasons businesses move outside the United States (Total: 60, Strongly: 29) American families will pay higher taxes next year (Total: 77, Strongly: 47) the world, I am paying more for the costs of products and services (Total: 56, Strongly: 24) the world, I am paying more for the costs of products and services (Total: 65, Strongly: 34) If Congress does not act on tax reform, businesses will continue to leave the country (Total: 58, Strongly: 30) 14 If Congress does not act on tax reform, businesses will continue to leave the country (Total: 60, Strongly: 30) the world, I am paying more for the costs of products and services (Total: 76, Strongly: 47) If Congress does not act on tax reform, businesses will continue to leave the country (Total: 54, Strongly: 28) The tax code is one of the biggest reasons businesses move outside the United States (Total: 65, Strongly: 31) The tax code is one of the biggest reasons businesses move outside the United States (Total: 57, Strongly: 26) 21
Rank Overall Republicans Independents $30-$50K $50-$75K 15 taxes would help businesses to come back from overseas (Total: 56, Strongly: 26) If business taxes were lower, this would create, create better opportunities for jobs, income and wages (Total: 75, Strongly: 44) If business taxes were lower, this would create, stocks and investments to grow and help people save and invest for their future and 50, Strongly: 21) taxes would help businesses to come back from overseas (Total: 64, Strongly: 29) would lower your cost of living (Total: 55, Strongly: 25) 16 would lower your cost of living (Total: 55, Strongly: 24) The tax code is one of the biggest reasons businesses move outside the United States (Total: 75, Strongly: 42) The US has the highest corporate tax rate in the world (Total: 49, Strongly: 26) If business taxes were lower, this would create, create better opportunities for jobs, income and wages (Total: 60, Strongly: 32) taxes would help businesses to come back from overseas (Total: 55, Strongly: 22) 17 If business taxes were lower, this would create, create better opportunities for jobs, income and wages (Total: 54, Strongly: 26) taxes would create more competition, lower cost of products and services (Total: 72, Strongly: 42) the world, my family and I are paying more in taxes (Total: 49, Strongly: 16) would lower your cost of living (Total: 60, Strongly: 29) If business taxes were lower, this would create, create better opportunities for jobs, income and wages (Total: 54, Strongly: 24) 18 If business taxes were lower, this would create, stocks and investments to grow and help people save and invest for their future and 53, Strongly: 26) If business taxes were lower, this would create, stocks and investments to grow and help people save and invest for their future and 72, Strongly: 41) would lower your cost of living (Total: 47, Strongly: 19) If business taxes were lower, this would create, stocks and investments to grow and help people save and invest for their future and 60, Strongly: 28) If business taxes were lower, this would create, stocks and investments to grow and help people save and invest for their future and 53, Strongly: 24) 22