Income Taxes Down For All Groups Except “Rich”
This week’s Courier Herald column:
It’s been difficult to get a good understanding of the tax cuts passed by a Republican Congress and signed into law by President Trump. Media coverage has generally been sporadic, and seemed to accentuate the negative whenever possible.
Shortly after the bill passed, coverage implied that most Americans would see little difference or higher taxes. That cycle mostly ended when CBS News hired an accountant to review the tax returns of three families and predict how they would fare under the new rates. To the surprise of each family and to the news anchors, each family would pay less under today’s rates.
After people began filing returns, a rash of stories focused on average refunds being 16% lower than prior years. These stories obfuscated or omitted the fact that tax refunds aren’t reflective of total amount paid. Withholdings for many taxpayers were reduced under last year’s tax tables, giving workers more money up front.
These stories too disappeared when average refunds began to rise when the bulk of tax returns filed. By April, the average refund was only about 2% different than under the old system.
Now comes an analysis by the Tax Foundation, which has reviewed the aggregate of all returns filed by April 15th. This covers about 80% of potential returns for 2018 taxes, but does not include those who have requested an extension.
The numbers are clear. Despite the rhetoric of critics who have decried the Tax Cuts and Jobs Act as a “tax cut for the rich”, the opposite is true. Taxes went down for all income levels except those earning more than $1 Million per year.
While rates for those on the top end of the scale were cut, so were the deductions they are able to claim. State and Local taxes, often referred to as SALT deductions, are now capped at $10,000 for deductions.
This affected taxpayers in states with high state income tax rates like California and New York, but also limited the deductions for those whose high home values have them paying large amounts of property taxes. It’s ironic that many who decry the tax cuts as a giveaway to the rich also want to restore full deduction of state and local taxes. It’s almost as if they’re being hypocritical…
Also noted by the Tax Foundation is the increase in the ease of filing under the new code. The standard deduction increased from $13,000 to $24,000 for married couples, and from $6,500 to $12,000 for individuals. This decreased those that itemized their deductions from 30% of returns filed to 10%.
Families with children were a big winner under the new tax code. With the childhood tax credit doubling and the income limit for families eligible for the tax credit increased, the Tax Foundation found increased use of the credit across all income rates except the for those earning more than $1 Million.
As we move closer to a Presidential election, many will attempt to continue to obfuscate the effect of tax cuts on the American taxpayer. We’ll also continue to see politicians from California and New York demand “the rich” pay more while they simultaneously try to restore SALT deductions so that the high taxes their states collect can be subsidized by deductions against their federal tax bills.
All of that rhetoric needs to be met with reality. Taxes went down under the Tax Cuts and Jobs Act for the average tax returns in each income bracket except those earning over $1 Million per year.
Meanwhile, the economy continues to grow. Wages are rising at the highest rate in over a decade. Unemployment is near half-century lows.
The tax cuts have worked as advertised. It would be nice to see more members of political media report that accurately.
About Author
Charlie
Founder of GeorgiaPol.com; Now weekly columnist Very interested in Georgia and Georginas. Interest in politics is waning daily.
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I mean, it’s not as if SALT caps were punitevely directed at Blue States (and let’s not pretend that that level of pettiness or divisiveness is something the Trump administration would shy away from). It’s not as if the tax reform was also poorly thought out in an attempt to merely get reform.
I’d also point out the tax reform has led to a $54 billion decrease in charitable giving.
I’d also point out that there was a 5% increase in the number of Americans with a balance on their tax bill and an increase in people asking the IRS for guidance on the new tax system, both of which the IRS admits are “perhaps an unintended consequence” of the reform (And, I seem to recall in the halcyon days of ~2014 when Republicans were obesicant when “unintended consequences” of Obamacare started to manifest).
I’d also point out that, while yes, this is shockingly poor financial planning, millions of Americans bank on their IRS refunds for household finances and on whole, refunds were down this year
I’d also point out that almost assuredly, just like every other tax reform, the deficit will grow as a result of the tax reform.
But sure, I suppose we can look at one return season and declare it a success.
I wish the media would report this more accurately too. It wasn’t a tax cut for “the rich”, it was a tax cut for corporations.
“From 2017 to 2018, the estimated average corporate tax rate fell from 23.4% to 12.1% and individual income taxes as a percentage of personal income fell slightly from 9.6% to 9.2%.
GDP growth was level with pre-tax cut projections. Wage growth was marginal and slower than GDP.”
https://www.vox.com/policy-and-politics/2019/5/29/18642928/trump-tax-cuts-and-jobs-act-analysis
Also, based on the chart from the Tax Foundation (a low-tax, pro-corporate think tank), total tax liability for those making $1M+ went from $139,000,000,000 to $140,000,000,000. Less than 1%.
And what about the deficit? Do conservatives really buy this snake oil? And the individual tax cuts are temporary, but the corporate tax cuts are permanent. Like so many things GOP these days, it’s not about good policy, it’s about gaining an advantage at the next election. No matter what it costs.
The deficit is at $757 billion and personal and corporate income taxes are down year to date. Programs and legislation are only unaffordable and contribute to the deficit when Dems propose them.
“And what about the deficit”
650 words doesn’t allow me to solve all the world’s problems nor explain every aspect of any policy issue. That said, federal revenues held steady/increased slightly despite the drop in corporate tax revenues:
https://blog.independent.org/2019/04/19/why-2018-federal-tax-collections-rose-even-though-corporate-tax-revenue-fell/
I prefer this analysis to one by a blogger looking to further butter his bread.
http://www.crfb.org/blogs/tax-bill-did-not-cause-revenue-rise
Adjusting for inflation and tariff revenue doubling to $50 billion, there’s been no increase in tax revenue due to income tax cuts.
While we are on the topic of spin, remember the tax cut was also touted as increasing wages for the working class. I don’t buy for a second that my minuscule lower weekly payroll taxes, cumulatively $100 a year, is a wage increase. Yes, the Right wing extremists actually used this in media spin. Nor do I buy that my alleged lower taxes is proportional to the rich and corporate tax cuts. The Tax giveaway is a failure. Every economist and budget expert pointed out the time to pay down national debt and reduce deficits is when tax revenues are high and the economy is good. Boo-hooing over unfair coverage is silly. Turn in your fiscal conservative card. Your membership is revoked.
This is a pretty bogus “report” by the Tax Foundation.
Looking at total amounts of income tax paid by an income group, without looking at the number of members in that group, inflation, population growth, etc. is completely meaningless. (And looking at the taxes on the “rich” without looking at those who have filed for extensions is really cherry picking the data as well.)
The group of taxpayers making $1M or more increased by 7%, so their total income went up significantly.
But pulling the original IRS numbers, people making $1M or more paid an average of 28.85% on the May 2018 (for TY2017) filing report and 27.52% of their income on the May 2019 report. So the “rich” got a tax cut along with everyone else.
And this doesn’t include the huge tax breaks paid by any corporations which they hold.
So in no way is this a “tax increase” on the rich.
I didn’t say it was a tax increase on the rich, despite your quotation marks. I said it wasn’t a tax cut for them, per the Tax Foundation numbers.
Your analysis indicates that you’re upset that their income went up. Typical, as many folks idea of “income inequality” isn’t a rising tide that lifts all boats, but punishing those that succeed so that those that aren’t feel better about themselves.
Nice try, and thank you for playing.
Right, so this tax cut lifts all boats, just some (big boats) more than others (little boats). And future boats will start out with a lot of excess ballast.
Anybody can implement a tax cut. It’s probably the easiest political thing to do, even easier than re-naming a post office. But we should expect leaders to do it responsibly.
You headline:
Income Taxes Down For All Groups Except “Rich”
From the article:
Taxes on the very limited group of $1M earners who didn’t file an extension went from 28.85% to 27.52%.
Taxes went down on the “rich”.
(EDIT: I did slam the Tax Foundation, but it appears they’ve deleted this article. Presumably because they realized the conclusions weren’t supported either.)
Caveat that anecdotes aren’t data.
I’m not wealthy, and I saw a tax increase.
The increase in the federal standard deduction is a mixed bag at best.
In order to increase the Std. Ded, they wiped out personal exemptions, so if you are MFJ with >3 kids it’s a net loss, even taking into account the expanded CTC. In addition, if you take the standard deduction federally, Georgia law requires that you take the standard deduction in Georgia, which remains at $6k for MFJ – much less than you would take as an itemized filer.
For 2018, my total (state+fed) tax bill was lower by itemizing, even though my itemizations were less than the federal standard deduction, so I lost out on the purported benefits of the increased standard deduction.
My Total Tax (Fed+State)/AGI ratio, which is probably the best way to compute this, went up from 9.5% in 2016 and 2017 to 10.7% in 2018. Household income is in the 75-80 percentile nationally, per https://dqydj.com/household-income-percentile-calculator/
As I stated in early 2018, my tax guy said I was going to be one of the 10% who would either see a raise in percentage paid or would brake even, since I almost always had around $12,000 In tax write off’s (mostly health care related) plus my 1 personal exemption. That was $17,000 I didn’t pay taxes on. Sure enough, my taxes percentage owed was .9% higher then 2017 and I was $600 Under the $12.000 itemized list – which I still had to do to see if I qualified. The payroll deduction really messed me up. I had to pay in almost $1800 the government did not collect. My new adjusted deduction for this year makes my take home pay $20 less ever two weeks then it was in 2017 and that’s after a raise…