President Trump and his Republicans heralded their 2017 tax bill as their signature accomplishment. It’s again in the news but not as they had intended.

It turns out that there are a lot of angry taxpayers, shocked that their federal tax refunds are smaller than anticipated, or non-existent. Some taxpayers are angry that they owe Uncle Sam money for their 2018 taxes; quite a switch from those larger refunds they had expected.

Helloooooo! Welcome to the ancient con game of “bait and switch,” honed and refined by Trump and his Republicans to new levels.

Economists to the left of Trump advisors Peter Navarro and purveyor of supply side economic snake oil, Larry Kudlow, had advised against that tax bill on multiple grounds. 

Income inequality has been growing for several decades. The Trump/Republican tax bill awards millions in tax breaks to the upper 1 percent, and especially the upper one-tenth of 1 percent of income earners. It offers — temporarily — a few bucks to some, not all, everyday Americans. This makes after-tax income inequality even worse.

But it’s more than “fairness,” that makes this tax bill the worst kind of macroeconomic policy. Instead of reducing the public debt during economic prosperity, it actually increases it, to a record over $20 trillion. 

If the public debt were reduced during prosperity, it would make it more economically feasible and provide political cover for politicians to engage in deficit spending necessary to counter the next recession. By increasing the public debt during prosperity, the ability of the government to fight the next recession is dangerously reduced.

This is not Ph. D level economics. It is, at most, freshman/sophomore level introductory economics, combined with common sense. During prosperity, it makes sense to put the government in shape to counter the next recession.

President Trump promised to reduce, or even eliminate, the public debt. “It would be so easy,” he said. That disingenuous rhetoric was as believable as “Mexico will pay for the wall.” Had Trump inherited an economy in recession, he could make a case for increasing federal deficits and public debt. But he inherited a fully employed economy. He and his Republicans have no excuse for increasing federal deficits short of satisfying their wealthy donors with lower taxes.

But what about those reduced refunds that angry tax payers are receiving? Didn’t that tax bill give at least a few temporary crumbs to some lower income recipients? 

Sure. Paul “Tin Ear” Ryan famously touted the high school secretary that was grateful for her $1.50 weekly increase that would cover her annual Costco membership.

Here’s where the “bait and switch” comes in, and where the Republicans were too clever for their own good. In an attempt to “prove” that tax cuts were accruing to ordinary folks, withholding was reduced. The resulting increased take home pay created the illusion that this was all due to reduced taxes. “So, thank you Mr. Trump—even though the 1 percent got millions in tax breaks, we’re nevertheless grateful for those few extra bucks you gave us.” That’s the bait.

Now, the switch. It’s time to file taxes and anticipate that increased refund due to the tax bill. Oops! Turns out some of that increased take home pay was money that was formerly withheld, but not withheld in 2018 because of the adjusted IRS withholding schedules. Even more disappointing, some of that money formerly withheld for taxes due was not withheld during 2018. It’s now due back to Uncle Sam.

But doesn’t this mean that their total federal taxes paid were, nevertheless, a few bucks less than before the bill? Yes, some everyday workers do get a few bucks out of the tax bill. But here’s the catch—not all taxpayers were as observant as the woman that thanked Paul Ryan for that “generous” $1.50. Most taxpayers either didn’t notice the small increase in take-home pay, or paid it no heed. If they noticed it, they believed it was all due to lower taxes. Few, if any, realized the effect of changes in the withholding schedule until they received a reduced refund, or a notice of taxes due.

Defenders of this bait and switch tax bill are falling all over themselves insisting that instead of being angry, those with smaller refunds should thank Trump for the tax bill and the reduced withholding that relieves tax payers from that interest-free loan they were formerly giving the federal government.

Yes, technically, over withholding is an interest-free loan to the federal government. Nevertheless, the 2017 average tax refund of around $2,800 is something that many Americans have counted on to pay toward big ticket items, like vehicles. Again, technically and theoretically, instead of having the IRS withhold it, tax payers could save that amount by squirreling away some $233 and change each month, and even earn a couple bucks in interest.

In reality, that doesn’t happen; the decision to save is as much psychological as economic. Similar logic applies to retirement planning. Many employees don’t take full advantage of employer-sponsored retirement plans. Behavioral economists have demonstrated that instead of having employees make the decision to opt in, participation increases by making participation in such plans automatic. Employees can still opt out. But if they do something patently unwise, they have to make the conscious decision, the effort, to do so.

Similarly, instead of giving the government an interest-free loan for a couple of bucks of foregone interest, many tax payers welcome that refund. They are willing to forego that couple of bucks of foregone interest in return for that lump sum refund due to over withholding.

Apologists for that bait and switch tax bill can rail all they want at “irrational and ungrateful” taxpayers angry at reduced refunds. But if Trump and Republicans pay a political price, it is well-deserved for the pernicious aspects of that tax bill — exacerbating income inequality and harming the nation’s ability to counter the next recession.

— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Saturdays in the Monroe Times.