Yes, Virginia, You (Probably) Got a “Tax Cut”

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Michael Siegel

Michael Siegel is an astronomer living in Pennsylvania. He is on Twitter, blogs at his own site, and has written a novel.

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28 Responses

  1. I guess we’ve finally lived long enough to reach official “moocher” status: we didn’t pay income tax this year. But we did pay several thousand dollars in property and sales taxes.Report

  2. Avatar Slade the Leveller says:

    Payroll withholding has always been a crapshoot. If the proposed W-4 goes through, then you’ll hear some howling.

    What’s lost in the shuffle is small C corps. Their tax rate went from 15% to 21%. You want to see how a flat tax works? There it is.Report

  3. Avatar bookdragon says:

    I don’t know about the majority, but I can do math and due to the cap on deductions for mortgage, property taxes and charitable donations we paid several grand in taxes more than last year. Same for most of our neighbors.Report

  4. Avatar DavidTC says:

    I find it amusing that people are upset about Trump, for once, doing a thing large numbers of Americans claim they support: simplifying the tax system.

    [citation needed]

    What the Republicans (This really has little to do with Trump) passed lowered taxes. It’s hard to say it _simplified_ them in any manner. I’m not aware of _any_ part of calculating taxes that has gotten easier, unless you mean ‘more people take the standard deduction’.

    Just last week, a bi-partisan bill was written to make sure the IRS can’t do your taxes for you and, while it smacks of crony capitalism, it’s also an open question of whether the IRS even could file your taxes for you without making mistakes.

    That’s not an open question at all. The IRS, almost by definition, knows the correct way to file taxes, so much so when there’s any dispute they are almost always accepted as the authority and even when it does make it to court, they almost always win.

    The only way the IRS would make mistakes in calculating people’s taxes is if it didn’t have all data. But, of course, the same is true to literally anyone who calculates taxes.

    Having the IRS calculate taxes with _just_ the information currently provided on W-2s and 1099s by third parties would be accurate for most taxpayers. People who take itemized deductions (Which starting this year is estimated to be only 6% of them) would need to additionally provide those, of course, but handing the records to the IRS and saying ‘figure this out’ is still simpler than calculating that by themselves and then having to defend it if the IRS argues. Or just…get rid of those deduction.(1)

    There are, of course, a few edge weird cases that are weird enough that the IRS would get things completely wrong, and those people probably should do their own taxes…and there’s not any reason they couldn’t. No one is saying that people shouldn’t be _allowed_ to file their own taxes, just that the IRS should do it all automatically and send out a bill. You could obviously file different ones in advance, or even dispute the calculated bill when you get it.

    Asserting IRS wouldn’t be good at figuring out taxes for the vast majority of American is nonsense, especially considering they literally do that…that’s how they _check_ people’s taxes returns, of course. Pretending otherwise is merely one of the ways that the for-profit tax prep industry stays in business leaching off government forms.

    1) Tax deductions are _really stupid_ anyway. I don’t mean as something that complicated taxes, I mean as an entire concept.

    If the government is going to subsidies behavior, then there should be a place you send evidence of that behavior, and you get cash in return. End of story. Having it as part of taxes is both nonsensical and an utterly moronic way to exclude _poor_ people from getting any benefit from it by having it be a _reverse_ progressive tax.

    Why should someone who makes $1,000,000 a year and donates $100 to charity get $37 from the government, when someone who makes $10,000 a year and donates $100 gets literally nothing? The entire concept of tax deductions is moronic. If we want to pay people $37 dollars for donating $100 to charity, let’s just DO THAT. And let’s certainly not do it in a way that only helps the wealthy!

    And removing deductions from taxes simplifies things hugely. If taxes are, entirely, based on income, they are really easy to calculate.Report

  5. Avatar Kolohe says:

    Virginians specifically got fewer benefits from the tax code changes (for a purple state) due to the income/income tax/property value tax profileReport

  6. Avatar CJColucci says:

    Despite major changes in my mortgage interest, SALT, and business expense deductions, my total tax bite came out about the same. My refund was about a tenth of what it used to be, and I always liked that $5-6,000 shot coming right after I have paid off holiday and year-end related expenses, but given the smaller bite out of my paycheck over the year, I had less need of it.Report

  7. Avatar Aaron David says:

    Report

    • Avatar PD Shaw in reply to Aaron David says:

      If so, it seems short-sighted if progressives want to reverse the tax cuts and end up proposing tax increases that increase taxes for 8 out of 10 Americans (number from Harwood’s link).

      Not sure what any of this means when just under half of American households didn’t pay income taxes. If Michael Cain received a tax cut, but lacked enough income to appreciate it, does it make a sound?Report

    • People are not stupid; if their taxes were cut by an appreciable amount, they’d know it. This was a weird year for us so it’s impossible to do an apples-to-apples comparison, but we still itemized and lost a lot of SALT deduction, so I expect it worked out to a tax hike.Report

      • Avatar Philip H in reply to Mike Schilling says:

        As I have read the reporting, the issue with “seeing” the tax cut is the adjustments the IRS made to withholding didn’t give the majority of taxpayers a boost that was big enough to be seen. The commonly reported average is around $600 for the year. If that reporting is true, then we need to see how adjusted withholding plays out for the 2019 tax year before we make decisions about effectiveness.

        Of course we are all skirting the issue of the expiration date on these a few years hence . . .Report

        • Avatar Jaybird in reply to Philip H says:

          That’s 10 bucks a week (assuming that the other 80 went to the tax return).

          Mad Magazine had a bit back in the 70’s or 80’s where they asked something to the effect of “how come small tax hikes always raise billions and large tax cuts only amount to a few cents in your pay check?”

          Iggles points to how important messaging is. If my paycheck only went up 10 bucks a week (or 20 bucks a paycheck), I’m not sure I’d notice really. An additional 80 bucks in the return over what I got last year? I’m not sure I remember what my return was last year so comparing it to this year won’t really register.

          I’m sure, as far as the gummint is concerned, it *IS* a huge tax cut. They see the $600, on average, from freakin’ everybody.Report

  8. Avatar jason says:

    We got a lower refund, but paid less taxes. I think we’re at a weird place because we do the “married but withhold at the single rate” and we could just barely itemize. Refund was about 500 less, but we still paid less in taxes.Report

  9. Avatar Marchmaine says:

    As a HENRY, I’m not sure if I should be happy or embarrassed that I didn’t pass the threshold to itemize my deductions.

    I reassure myself that I’m not a traitor to my class by remembering the new code doubled the standard deduction… but still, I can’t shake the feeling, am I now just middle class?Report

  10. Avatar Jay L Gischer says:

    I haven’t seen data, but I think it’s likely that the median California taxpayer had their total tax bill raised. The SALT and mortgage changes fall hard here.

    Furthermore, I suspect that’s one reason that Republicans did so badly here last November. If the R’s can’t keep your taxes lower, what good are they?

    Mind you, as a progressive/liberal I think it’s probably ok to limit the mortgage deduction. The SALT deduction I’m not so sure about, though I’ve read claims that it addresses an equity problem. What I’m unhappy about is what they did with the money – give it to corporations to do stock buybacks.Report

  11. “A massive interest-free loan to the feds” is fairly meaningless when the interest you’d get by putting that money in a checking or passbook savings account is pretty much zero.Report

  12. Avatar North says:

    I think we’ve had the cuts for long enough now to be able to say they failed in all their publicly stated goals. They exploded the deficit, they certainly didn’t pay for themselves and they were massively tilted to high income earners (which is, of course, why the GOP structured them that way). Also they didn’t boost the economy even remotely as much as the tax cut boosters claimed they would.

    Can we finally bury the idea that the GOP is the more fiscally responsible party?Report

  13. The deficit is surging right now and we are on a completely unsustainable fiscal path.

    Surging at full employment. What will happen once the economy slows down is hard to imagine. (See now why Trump wants to pack the Fed with lackeys?) Yet people who claim to be fiscal conservatives aren’t calling for the GOP’s collective heads; this would amaze me if I had any belief in that claim.Report

    • Avatar Philip H in reply to Mike Schilling says:

      Like @North’s comment above yours . . . the GOP hasn’t operationally been fiscal conservatives since Reagan. We had almost 40 years of data going into the tax cut debate and approval that it wouldn’t work, but it was done anyway because it had a policy and political outcome focus, which was achieved. and frankly no one should be surprised that the corporations used buybacks to boost stock prices – most of the Fortune 100 CEO’s outright said they would do so beforehand.

      As to the slow down – were we to be using the expanding debt and deficit to fund infrastructure this would not likely be an issue. But since we aren’t, the Fed has a small amount of monetary policy cushion, but not really enough for a massive bubble bursting recession.Report

  14. Avatar Richard Hershberger says:

    My federal taxes went down a few hundred dollars. My state taxes went up considerably more as a direct consequence. I assume this is by design.Report

  15. Avatar Richard Hershberger says:

    Also, on the topic of simplification, the 1040 is now just one page, where it previously was two. Success?!? The IRS accomplished this by moving onto new schedules some stuff that had previously been on the main 1040, and also squishing together onto one line stuff that had formerly been on two. Does this make it simpler? Not at all. Rather, it introduced extra shuffling around with schedules, and those multiple items crammed onto one line are less user friendly than having different items distinct from one another. But someone undoubtedly was high-fived for getting the 1040 down to one page.Report

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