By Tim Phillips
April 23, 2019 at 5:00 am ET
During the lead up to Tax Day this year, Americans were inundated with inaccurate and misleading stories about the effects of the Tax Cut and Jobs Act signed into law by President Donald Trump in late 2017. Here’s the bottom line: Most Americans filed returns that show they paid less income tax in 2018. No amount of propaganda can change that fact.
No matter how hard critics try to persuade you otherwise, the reality is that two-thirds of all taxpayers saw their total tax bill cut, according to the Joint Committee on Taxation, Congress’ official scorekeeper of tax legislation. Nearly half of all filers will get a tax cut of $500 or more, a substantial savings.
And that doesn’t even count the benefits to taxpayers of a better job market, higher wages and more opportunity. It is hard to square all this with polls showing just 17 percent of Americans think they’re paying less tax.
The media has made much of the fact that there have been fewer tax refunds issued and that total refunds are smaller — neither of which has anything to do with whether people are paying less in taxes.
Even that argument began to fall apart fairly quickly when the refund gap began to close in March. But in any event, it’s a red herring.
Looking simply at refunds is a misleading measure of how the tax cut affects the pocketbooks of American families. It’s the bottom line — the total tax liability — that counts. And according to the Joint Committee on Taxation, that is going down for every group.
According to the Joint Committee on Taxation, total income taxes will decrease an average 13.5 percent for those with adjusted gross income between $20,000 and $30,000, 11.5 percent for those between $30,000 and $40,000, and 10 percent for those between $40,000 and $50,000.
It’s understandable that Americans would equate tax refunds with tax bills. What most people care about in the immediate term is whether they owe the Internal Revenue Service and how much.
But an honest accounting of the effects of the tax cut must also pay attention to the total taxes paid to the federal government throughout the year, not just on the day of tax reckoning. Most of us tend to ignore the fine print on our paychecks that tells us how much we pay in taxes every pay day. But that is no defense for spreading disinformation.
Because the tax code is so complicated with credits, deductions and exemptions, the details of individual taxpayers’ situations matter greatly to their bottom line — things such as how many kids they have, how big their mortgages are, even what state they live in. The Tax Cuts and Jobs Act took some necessary first steps at simplifying the tax code, such as capping the deduction for state and local taxes at $10,000. Some relatively affluent taxpayers in high-tax locales might find their taxes don’t go down as much or perhaps even go up a bit because that deduction is now limited.
This was a sound move — it is simply unfair that people with identical life circumstances can have vastly different federal tax bills based solely on where they live. The federal tax code should treat everyone the same.
But even with SALT taken into consideration, studies by the Tax Foundation and the Heritage Foundation each found that, on average, taxpayers in every congressional district at every income level will see their taxes go down.
Nothing conceived by the hand of man is perfect, and the Tax Cut and Jobs Act is no exception. The tax code is still too complicated, and tax rates are still too high. But for the vast majority of Americans, it meant a lower tab this Tax Day.
Tim Phillips is president of Americans for Prosperity.
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