The New York Times ran a story Sunday reluctantly admitting what Republicans and President Trump have been saying all year. The story began “Face it: You (probably) got a tax cut.” The next line was equally true: “And there’s a good chance you don’t believe it.”
Contrary to Democrat messaging that the tax cut benefitted only corporate fat cats and the richest 1%, analyses done by Congress’ non-partisan Joint Committee on Taxation, the Institute on Taxation and Economic Policy as well as the Tax Policy Center all estimate that 65% of people are paying less federal income tax this year. But the NYT also observed: “To a large degree, the gap between perception and reality on the tax cuts appears to flow from a sustained – and misleading – effort by liberal opponents of the law to brand it as a broad middle-class tax increase … the messaging stuck.” Polls show that two-thirds of Americans don’t believe they’re getting a tax cut.
Why this contradiction? First is the aforementioned and effective Democrat talking points – repeat something often enough and people will perceive it to be true even if it’s not. In Kansas, there is a second reason. Gov. Kelly is keeping part of your refund for her expansive spending agenda. She vetoed the Republican-led and passed tax bill allowing Kansans to itemize their state deductions to take full advantage of the changed federal law. If you’re an average Kansas taxpayer, you’re paying less to the feds and more to the state as the Kansas Legislature was not able to override her veto.
Another reason is the method the tax cuts were administered. Unlike in 2001 during the Bush era tax cuts when taxpayers were mailed lump sum rebate checks, the Trump administration chose to enact the cuts immediately upon passage by having employers adjust paycheck withholding amounts. Less tax was withheld from our regular paychecks, giving us higher take-home pay immediately. The Times observed: “Most people didn’t recognize the increase in take-home pay, or at least didn’t attribute it to the tax cut … (and) it’s little consolation to discover that you received a couple thousand dollars during the year but you already spent it.”
Personally, I’d rather keep more of my hard-earned money for my own economic liberty and pursuits of happiness rather than allow the government to get to use it interest free for a year.
That also leads to the next skewed perception. While taxpayers are paying less federal tax, they are also getting smaller refunds than in the past (caused by the reduced tax withholding). Typically, taxpayers focus on the wrong number – the last one provided. That is literally the IRS 1040 bottom line refund (or additional amount owed). The scarier total tax owed number is in the middle of the page. Most people also seem to wrongly associate that when the benevolent IRS is giving less back to us it’s because they needed to keep more to pay the (higher) tax. Getting a big refund does seem to make people feel better even if they work one-third of the year to pay off their total tax obligations.
Greg Beck is a Leavenworth Times columnist.