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Did You Get a Tax Cut? Data Says Yes

Did You Get a Tax Cut? Data Says Yes

“The gap between perception and reality on the tax cuts appears to flow from a sustained — and misleading — effort by liberal opponents of the law…”

https://www.youtube.com/watch?v=dAxREsm8Ws8

Happy Tax Day! Unfortunately, the 16th Amendment still exists, which means everyone pays federal taxes. Today is the due date so you better get it in or else the IRS will come after you for the money they believe belongs to them.

But I digress. Remember that tax plan that passed in late 2017? The left pounced and convinced people they would not receive a tax cut. Some even believed they would see a tax increase.

Lies. Data has proven the left wrong once again.

In Sunday’s New York Times, economics writer Ben Casselman and economics and tax policy writer Jim Tankersly, penned a piece in an attempt to turn the tide.

They noted how poll after poll showed that people didn’t believe they would receive a tax cut, mainly due to the spin fed to them by the left:

To a large degree, the gap between perception and reality on the tax cuts appears to flow from a sustained — and misleading — effort by liberal opponents of the law to brand it as a broad middle-class tax increase.

Yet the data shows 65% of citizens paid less:

The Tax Policy Center estimates that 65 percent of people paid less under the law and that just 6 percent paid more. (The rest saw little change to their taxes.)

Other analyses reached similar conclusions. The Joint Committee on Taxation — Congress’s nonpartisan team of tax analysts — found that every income group would see a tax cut on average. So did the Institute on Taxation and Economic Policy, a left-leaning think tank that was sharply critical of the law. In fact, that group went even further: In a December 2017 analysis, it found that every income group in every state would pay less on average under the law in 2019.

So far, tax season seems to be playing out more or less as the experts predicted. H&R Block, the tax-preparation giant, said last week that two-thirds of returning customers had paid less tax this year than last (excluding people who owed no tax in either year). Taxes were down, on average, in every state.

It all comes down to withholding, which is a conversation I have with my best friend. People have become reliant on the refund check issued by the IRS that they don’t realize they bring a larger chunk home in their paychecks:

“Most people didn’t recognize the increase in take-home pay, or at least didn’t attribute it to the tax cut,” Mr. Rigney said. Some of them might realize it now that they’re filing their taxes, he said, but “it’s little consolation to discover that you received a couple thousand dollars during the year but you already spent it.”

High earners did far better under the law. The top 20 percent of earners received more than 60 percent of the total tax savings, according to the Tax Policy Center; the top 1 percent received nearly 17 percent of the total benefit, and got an average tax cut of more than $30,000. And that’s not even factoring in the law’s huge cut to corporate taxes, which disproportionately benefit the wealthy households that own the most stock.

There’s another reason why people oppose the law, including me. The federal government cut taxes, its so called “revenue,” without cutting spending. What happens when you continue to spend without the needed money coming in? The deficit grows.

This will put the government in a bind when the tax cuts expire. It already has “added hundreds of billions of dollars to the federal deficit.” When the tax cuts expire in a few years, the federal government will have to face reality by either cut spending or raise taxes.

People also protested the law due to the SALT (state and local taxes) deduction, especially from those in high taxed states. The piece in The New York Times found that the “cap definitely had a bigger effect in those states,” yet it “doesn’t mean most of their residents saw a tax increase.” The two men explained:

For one thing, the two-thirds of Americans who took the standard deduction in previous years weren’t taking the SALT deduction, or any other itemized deduction. And most households earning less than $75,000 — as about two-thirds of households in New York State do — were comfortably under the $10,000 cap.

Paradoxically, many higher-income households weren’t getting the SALT deduction, either. That’s because the alternative minimum tax effectively wiped out many deductions, including SALT, for couples earning more than about $250,000 a year. The tax law significantly defanged the A.M.T., meaning most of those households ended up getting a bit of a tax cut.

Those affected by the SALT cap didn’t come out as losers since the tax “law doubled the child tax credit, for example, and made it available to more taxpayers.”

Once again, the mainstream media and the left didn’t have to spin this to cause outrage. The fact that the government cut “revenue” and didn’t cut spending should have been enough to spell trouble for people.

[Featured image via YouTube]

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Comments

UnCivilServant | April 15, 2019 at 11:36 am

My refund was miniscule due to accurate witholding rates. My Taxes went down by $5k on $5k more in income. If you’re not looking at all the data, you might miss it.

We have gone from “who guards the guards” to “who fact-checks the facts checkers”? Nothing changes. As Orwell pointed out…some day telling the truth will be controversial .. Orwell was an optimist.

Now days facts are stubborn things? Especially when originally uttered as true by a dead white male who was once President of a country that was never great, selectively forever tarnished by slavery and on the wrong side of history. Adams is both dead and dead right.

I always keep my witholdings fairly close to correct because I don’t like giving the government an interest free loan (especially when they will penalize me for not paying off their extortions quarterly if I reach a certain level of “delinquency”)

This year, I kept more in my pocket AND got a refund of about 300 bucks (although I owed the state a sub 100 amount because I paid so much less in fed taxes). Best of all, I didn’t have to itemize because the standard deduction has become so much more generous…very easy to file. Great tax plan IMO!

    healthguyfsu in reply to healthguyfsu. | April 15, 2019 at 1:20 pm

    For the record and contrast, I owed every year under Obama (especially after he let the payroll tax cuts expire).

    This also happened while I was a low wage-earning post doc making about 38k.

“There’s another reason why people oppose the law, including me. The federal government cut taxes, its so called “revenue,” without cutting spending. What happens when you continue to spend without the needed money coming in? The deficit grows.”

While this is correct, revenue can also increase, in theory, from economic growth and personal wealth advancement due to tax cuts.

People will pay more in indirect taxes like sales, capital gains, and luxury taxes when they have more disposable income. Businesses can invest more in the economy, which means less entitlements and more workers (if they will actually look for a job).

Time will tell what happens to revenue and deficit. I’m not optimistic, though, only because of the buffoons in charge of the House.

People do not even know that deficit spending is a problem. Many people, if not most, practice it in their daily lives. People routinely continuing spending, on credit, right up to the point where their credit cards are maxed out and they are forced to stop. That is why there is an entire industry devoted to helping people reduce their credit balance so that they can survive. Deficit spending has become commonplace in our society.

Now as to the tax revenue collected in 2018. Federal tax revenue was $3.33 trillion for that year. It was $3.32 trillion for 2017 and $3.27 trillion for 2016. [ https://www.thebalance.com/current-u-s-federal-government-tax-revenue-3305762 ] So, there was an increase in actual tax revenue. That spending increased, which is now the norm in DC as it is in most of our society, is a BBIIIGG problem. But, as with most of the other members of our society, the politicians will continue to spend all that they can, until it all runs out. What will happen then is anyone’s guess.

I had to shame the dishonest local media on their own FB page because they ran endless segments of local North Carolinians whining on camera about their ‘tiny’ or non-existent tax refund. After about a week, they discussed the change to the withholding levels, but in a dismissive way. You were left to draw your own conclusions about whether your paycheck was greater than previous years.

I am a CPA with a tax practice in the Dallas metro plex.

A couple of points that are common accross the board

1) the withholding is down for most clients
2) most clients have lost 10k-30k in itemized deductions and personal exemptions.
3) even with the loss of the deductions and exemptions, the overall tax liability has gone down.
4) several clients have had increases in gross income in the 100k range, yet the increase in tax has ranged in 12k-14k range.

Overall, almost every client has had significant reduction in tax liability.

    healthguyfsu in reply to Joe-dallas. | April 15, 2019 at 12:50 pm

    The great state of TX is great for many reasons. One of them is no state income tax. That may not be the case everywhere.

    That said…

    I understand that some will be squeezed on the SALT reform, but it will only be to those that itemize (a tax situation that is nearly exclusive to the wealthy). As mentioned in the article, the credits that help itemizers with lower incomes (like the childcare credit) offset this loss for many.

    Therefore, it’s easy to surmise that some upper middle class and wealthy who itemize for a high SALT deductions are the main group that might pay a little more taxes. While this kind of squeeze goes against my principles, it sounds like exactly what the left and their MSM cronies constantly platform on for tax reform.

    Thus, there are only two major reasons for their outrage: 1. The wrong party made the right move 2. State politicians may be more obligated to tax their wealthy constituents responsibly and curb the class warfare within their own borders.

      Joe-dallas in reply to healthguyfsu. | April 15, 2019 at 1:21 pm

      regarding the salt deduction – A significant portion of my client base is in CA, NY and CT. Several of those clients have lost 100-200k of salt deductions, They are still coming out ahead, partly due to the AMT reform.

amatuerwrangler | April 15, 2019 at 12:54 pm

I saw a segment of the national news last night, relying on a poll of taxpayers, not actual tax data, that people actually paid more, despite DJT’s claims otherwise. It included a couple who was crying the blues because they got less of a refund than usual and therefore were unable to payoff debt accumulated, as was their plan. I fail to see how that can be anyone’s fault outer than their own. Oddly, (not really) the interviewer did not ask any questions regarding their take-home income over the proceeding year.

I’m in CA, so…. I am not a high roller by any stretch, so the SALT limitation did not reach me. My mortgage interest came nowhere close to the ceiling. I did file long-form to take those deductions, on top of the new, improved standard deduction. And the long form was necessary because CA piggy-backs on the federal return so my CPA still needed to cover all those bases for the state. I got a fed refund in low 4-figures, but about 30% went back out to the state, which had increased its rates.

Most people gauge how much income tax they pay on the size of their refund. They have no idea what the figure is down the column where it says “total tax owed”. That is where the rubber meets the road. Ask people about this, they will come up with something like “I don’t pay any tax, I get money back”.

    healthguyfsu in reply to amatuerwrangler. | April 15, 2019 at 1:40 pm

    I can somewhat relate with the every day people (not the news vultures who should do better).

    I was being lazy.

    Here’s our actual very middle class data (we are still relatively young)

    2016:
    Effective Income Tax rate: 12.9%

    2017:
    Taxable Income increase from 2016: 3799
    Effective Income Tax rate: 14.7%
    Income Tax INCREASE from 2016: 875

    2018:
    Taxable Income increase from 2017: 5504
    Effective Income Tax rate: 12.8%
    Raw Income Tax SAVINGS from 2017: 861
    Raw Income Tax INCREASE from 2016: 14

    My taxes went back down below 2016 levels (in terms of rate) despite making over 8k more in 2018!

I got a tax cut but I still have to pay. 🙁 Been avoiding hitting send on my return all day. Guess I should just get it over with, eh?

If you’re a two-income professional couple in a state with high income and real estate taxes you’re going to pay more. Taking away the AMT did little to help me out, since I lost close to half of my previously claimed deductions. And I think it’s a little disingenuous to say the Child Care Credit makes up for it, since it’s older taxpayers who are getting hit by this. I agree with the poster who said this is just what the left wanted all along, but they can’t admit it was Trump who gave it to them.

“…which means everyone pays federal taxes.”

No. Having just sent a check I think I’m paying for about ten of them.

MAGA

I’m looking at the effective tax rates year over year. I’ve been averaging 18%+ for the past five years. This year was 14.5% on a modest decrease in income. I’m a little miffed that my charitable contributions and blue state taxes no longer “count” towards my deductions, but I’ve netted less taxes at the Federal level. And a modest refund.

Mine wasn’t much one way or the other. But I paid off my mortgage, and do not itemize anymore. The increase in standard deduction offset the loss of personal exemptions… so I came out pretty close to even.

My taxes went up about $1500, primarily because the loss of the personal exemption wasn’t offset by anything and the increase in the standard deduction was of no benefit.

We didn’t get a tax cut, but we weren’t expecting one either as our children are grown (with 1 gone and 1 still in school, paying her own way as she goes!) and the house has been paid off as well.

What I’m waiting for is the eventual destruction of ALL DEDUCTIONS and eventually a Flat Tax. While the Socialists won’t have any of that, we will get to a point where they can’t stop it. Of course, if Steve Forbes had been elected instead of “W….” Maybe in my lifetime.

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