Tax Cuts and Jobs Act Eliminates Tax Refunds for Many

When the Tax Cuts and Jobs Act (TCJA) was presented, the Trump administration promoted it with the promise that “the average family (would) get a $4,000 raise.” After the TCJA was passed, many families actually did see a small increase in the amount in their paychecks during the year. Now that it’s tax season, however, many of those people are surprised to find that instead of the tax refunds they’re used to receiving, they owe money to the IRS. The Tax Cuts and Jobs Act, they feel, was a lie.

With the TCJA, the IRS made changes to its tax withholding tables. As a result, most taxpayers had fewer withholdings in 2018 than they did in previous years, but they were unaware of it. They are also allowed fewer itemized deductions such as business mileage, some medical expenses, and mortgage interest this year than they could in past years. In many cases, taxpayers’ withholdings decreased by more than the actual taxes they owed, hence the “raise” many people saw in their paychecks during the year.

A Government Accountability Office (GAO) report explained during the summer what would happen with people’s taxes, advising people to check their withholding status. But the average person doesn’t regularly read GAO reports.

During the year, then, with a bit more in their paychecks, Trump’s base were fans of the Tax Cuts and Jobs Act, happy to cite it as evidence that their president had their backs. One has to wonder, however, if this false “raise,” resulting as it did from reducing withholdings by a little too much, was engineered with the midterms in mind.

Many people have come to rely on their income tax refunds to pay off bills, purchase needed items, or meet other expenses. As they are realizing the real impact of the Tax Cuts and Jobs Act, however, they’re tweeting out their anger.

Dee Nelson (Dee Nelson (@deeebeeezz) tweeted: “@realDonaldTrump just did my taxes and thanks for increasing mine!! No change in income and got back $400 less than last year. That campaign promise was one of the only two reasons I voted for you. Rethinking that decision now.”

The Trump administration and the Treasury maintain that the Tax Cuts and Jobs Act will balance out the way taxes should be paid. Since in the past, about 75 percent of American taxpayers received refunds, they are quick to point out that the withholding system was flawed, and that fewer people should be getting refunds because it means that too much was withheld during the year.

Though this may be true, two other things are also true: Since so many taxpayers, including many who voted for Trump because of his promised tax cuts, feel they’ve been deceived, perhaps the Trump administration could been more clear about the possible consequences to the average American at tax time. It’s also true, though, that, over time, the Tax Cuts and Jobs Act will in fact raise taxes for many middle-class and working class tax payers.

Tips for filing tax returns under new tax code | CNBC [2019-01-25]

Will Trump’s tax reform lose popularity after Americans file this tax season? | Fox Business [2019-01-30]

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