WASHINGTON DC (February 13, 2019) —
The tax filing season began just over two weeks ago. Despite the disruption of the temporary, partial government shutdown, the IRS reports that all systems are a go. Tax returns are being processed as normal and refunds are being sent out.
While there are lingering effects from the shutdown, overall IRS and Treasury have done a good job of minimizing its effects on tax filers.
This tax season is receiving additional scrutiny, as it is the first time taxpayers are filing under the tax cuts and reforms enacted by the Tax Cuts and Jobs Act (TCJA).
My colleagues on the other side of the aisle and some in the media appear to be obsessed with finding anything they can manufacture to declare this filing season a failure for the TCJA. And after only the first two weeks!
Case in point, last week the IRS released preliminary filing data covering the first week of filing season.
Immediately, naysayers began focusing on data that suggests tax refunds in the first week were down slightly over last year, as well as focusing on anecdotal social media posts.
Never mind that the current refund numbers are based on only a few days of data or that refund statistics can vary widely from one week to the next.
Never mind that most of the social media posts are unverified. Many have the markings of a coordinated effort by liberal activists who have regularly used “#GOPTaxScam” to attack the law on Twitter, despite a vast majority of taxpayers paying less in taxes.
Yet, the media falls for it — hook, line, and sinker — including such tweets in articles with no questions asked or verifying the veracity of the claims.
To be fair, often times buried deep in such articles, well below a sensational headline, is an attempt to demonstrate some semblance of an unbiased report, noting that under the TCJA most taxpayers will see a tax cut.
That’s right. You most assuredly wouldn’t know this from the headlines bemoaning a reduction in tax refunds, but the vast majority of taxpayers experienced a tax cut last year — and will this year too.
Every analysis, from the nonpartisan Joint Committee on Taxation, to the right-leaning Tax Foundation, to the liberal Tax Policy Center, demonstrates that taxpayers are sending less of their hard-earned money to Washington this year.
As an example, an Iowa family of four with the state’s family median income of around $75,000 stands to see their tax bill cut by more than half, or about $2,100.
This is real relief that began appearing in many taxpayers’ paychecks at the start of 2018.
And that’s an important point.
The government could have chosen to deprive this taxpayer of this extra $2,100 last year until they filed their taxes this year. This may have been the best thing to do if you are someone who starts with the assumption their money would be better off in the government’s hands, interest free.
I, for one, do not. I believe taxpayers know better how to spend their hard-earned money than Washington.
It should be up to the individual taxpayer whether it’s in his or her interest to put that extra $2,100 dollars, or about $175 a month, in a savings account, buy school supplies for their children, or to help make a car payment.
In early 2018, Treasury and the IRS implemented updated withholding tables to give taxpayers just that option.
A chief priority for the new withholding tables was accuracy. The IRS’ goal was to help taxpayers get the right amount withheld from their paycheck.
However, no withholding table will ever be perfect. If they were, there would be no need for tax refunds. Only what was necessary to satisfy a taxpayer’s tax obligation would need to be taken from their paychecks.
But that is unlikely. Every taxpayer is affected a little differently under the tax code based on their personal circumstances and some taxpayers incomes may fluctuate through the year. This makes exact withholding based on general tables nearly impossible.
As a result, the amount of a taxpayer’s refund is unlikely to be exactly the same as it was under the old law. Yes, some taxpayers may a see a smaller refund, but others may see a larger refund.
But the size of one’s refund tells you nothing about whether a specific taxpayer benefitted under the Tax Cuts and Jobs Act or not.
Given this fact, the best way for taxpayers to see how tax reform affected their bottom-line is to compare this year’s tax return with last year’s, rather than on the size of their refund.
Tax preparers and tax return software often will provide an analysis comparing the current and previous year’s tax return.
I encourage taxpayers to compare the total amount of taxes paid this year with last years. Or, if your income materially changed from last year, compare your effective tax rate. That’s the taxes paid as a percentage of your adjusted gross income.
If your tax preparer does not already provide you with this information, ask them.
If taxpayers take this approach, the vast majority will see that their tax bill has gone down. This is what matters, not the size of their refund. The size of a refund tells you nothing beyond the degree to which a taxpayer has overpaid their taxes over the course of the year.
I hope Americans will take the time to check so they can see the real effects that tax reform has had in their lives.
I yield the floor.
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