The tax windfall that wasn't: A troubling new IRS report suggests many Americans may be giving money right back to the government
S E E D E D C O N T E N T
Americans like their tax refunds. Refunds are good for tax administration, too. Plenty of evidence shows that tax compliance is higher when taxpayers see refunds on their tax returns.
But millions of Americans looking forward to their tax refunds are about to be disappointed, even upset. They will not see their expected refunds when they file their returns in 2019. Even worse, many will be required to pay extra taxes. Why the change? The Republicans’ push to sell their tax law to the American public is the culprit.
The tax law signed by President Trump in December of 2017 made many changes to the tax code. The standard deduction increased, but the personal exemptions disappeared. Business owners got a rate cut but the deduction for state and local taxes shrunk. Mortgage interest deduction became less generous, but child credit expanded. Because of all these changes and many others, the withholding form that every American employee filed with his or her employer became outdated when 2018 arrived.
Employers needed new information from employees to keep the refunds roughly the same. But getting this information would take time. And Republicans wanted American workers to see tax savings from the 2017 tax law in their paychecks right away, before the 2018 midterm elections — whether these savings were real or not.
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This was projected but people didn't want to listen to the truth.
The new tax law was only good for a select few, the vast majority won't see a penny, by design.