Tax Refund Amounts Take a Dive Under GOP Tax Plan

When Congress passed the $1.5 trillion Tax Cuts and Jobs Act in late 2017, President Donald Trump bragged it had “reached an agreement on tax legislation that will deliver more jobs, higher wages and massive tax relief for American families and for American companies.” Tara Golshan, writing in Vox, was less bombastic, calling it “a far cry from the simplified tax code that Republicans have long been promising” but still “a substantial reshaping of the nation’s tax base.”

By June of 2018, The Washington Post reported, the bill didn’t deliver higher wages. In fact, as reporter Philip Bump wrote, “Year-over-year, the real average hourly earnings number has dropped by 0.1 percent,” according to data from the Bureau of Labor Statistics.

Now, as America enters the first tax season under the new tax plan, it’s a chance to see whether it has resulted in greater returns for American taxpayers. Early results, however, are not promising. As Lisa Lambert reported at Reuters on Monday, 2019’s tax season “got off to a slow start in the first week, with data released on Friday showing a significant drop in returns and refunds.”

“The average refund of $1,865 was 8.4 percent smaller than the average refund in the period last year,” Lambert said. Just 16.04 million returns were received in the week ending Feb. 1, down 12.4 percent from the same week in 2018, according to IRS data. An estimated 13.1 million returns have been processed so far, down 25.8 percent from the same period in 2018.

Trump promised his bill would make taxes so simple, Americans could file them on a postcard, but instead, as Mary Papenfuss reports in HuffPost, the law added new challenges: “[complicating] payroll withholding, so that not enough money was withheld by employers in many cases, meaning that people now owe more taxes. The new law also capped IRS deductions for paid state and local taxes, including real estate taxes, resulting in a nasty surprise for many filers. Several other deductions are no longer allowed.”

Taxpayers, Papenfuss continues, “are complaining on Twitter that they have always received a refund — but now owe the IRS instead.”

.@realDonaldTrump @GOP I am a middle class nurse. Why is my #taxrefund 59% (literally 1000s of dollars) LOWER this year than anytime in the past seven years? Nothing in my situation has changed. I thought your “wonderful” #tax plan was supposed to help the middle class? #GOPlies

— Russell Matthews ? (@NightBurn0381) February 2, 2019

Last year I got a tax refund. This year, with unchanged salary, I owe $1300.

I’m middle class.

Yet the very wealthy got huge cuts. #ThanksRepublicans

— David Hoffman (@atDavidHoffman) February 3, 2019

“Democrats had warned that the cuts and other changes in the overhaul would primarily benefit the country’s wealthiest,” Lambert reports.

The left-leaning Center on Budget and Policy Priorities wrote in 2017 that “mainstream estimates conclude that more than one-third of the benefit of corporate rate cuts flows to the top 1 percent of Americans, and 70 percent flows to the top fifth.”

The current tax season started Jan. 28, just three days after the U.S. government reopened after a 35-day partial shutdown—the longest in American history. Treasury Secretary Steven Mnuchin ignored the question of whether the shutdown impacted the low rate of returns and lower refunds, saying in a statement that the season “has successfully launched with millions of tax returns having been filed.”

Perhaps in response to the reports of lower returns, the Treasury Department tweeted Monday that “News reports on reduction in IRS filings & refunds are misleading. Refunds are consistent with 2017 levels and down slightly from 2018 based on a small initial sample from only a few days of data.”

Taxes are due April 15, and it remains to be seen whether the taxpayers filing later will see similar refund decreases in their returns. Politico reports that Morgan Stanley estimates refunds will rise by 26 percent, but others are more pessimistic. Edward Karl, vice president of taxation for the American Institute of CPAs, isn’t convinced time will heal the tax wounds. As Karl told Politico writer Aaron Lorenzo, “There are going to be a lot of unhappy people over the next month.”