The media’s apoplectic reaction to 2018 tax refunds displays a fundamental misunderstanding of the U.S. tax code and the very notion of what a refund actually is.
The fact is hard-working Americans now have more money in their paychecks thanks to the Trump tax cuts, though you would be hard-pressed to know this watching media coverage as we enter tax season.
News reports about people receiving “smaller tax refunds” fallaciously filled the airwaves last week. The clear insinuation in many of these articles is that the historic Tax Cuts and Jobs Act, passed by Republicans and signed by President Trump in 2017, is increasing the tax burden on ordinary Americans.
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The entire premise is absurd, actually, because the focus on refunds is fundamentally misleading.
The reason many Americans are seeing a smaller refund this year is that they are paying less in taxes. The Tax Cuts and Jobs Act significantly cut tax rates for middle class families, 80 percent of whom had a lower tax burden in 2018 than they did before the president’s tax cuts took effect.
The law also simplified the tax code and made changes to withholding rules that together served to reduce overpayment to the government by taxpayers, which is the only reason the IRS gives tax refunds.
Would you rather receive a bigger refund, or just keep more of your money in the first place?
Think about it this way: these reports about smaller refunds are every bit as disingenuous as headlines about Americans getting the biggest tax refunds of their lives would be in the wake of a massive tax increase. Higher tax burdens mean bigger refunds. Lower tax burdens mean smaller refunds, because the government got less of your money during the tax year.
Not only do smaller refund checks indicate that people have had access to more of their money throughout the year, they are also a sign that we’ve created a more efficient income tax system. In a perfectly efficient system, no one would get any refund, because they would have paid the exact amount that they owe.
It is clear that the radical left has taken over the Democratic Party, leaving behind the party of John F. Kennedy.
In fact, that’s the basic motivation behind using an income tax in the first place — it taxes people when they have it, not later on when they don’t.
That type of efficiency has been part of the basic philosophy of Republican tax policy since President Ronald Reagan’s 1981 and ‘86 tax cuts, which did away with the sky-high marginal rates like some Democrats are now advocating we bring back.
In the pre-Reagan days, it was all about the refunds, taking advantage of the thousands of complicated exemptions, deductions, and loopholes.
Maybe that’s what the Democrats who are pushing for 70-90 percent top tax rates really want: massive income tax bills throughout the year and plenty of deductions and loopholes so we can spend even more time pouring over our tax returns just to make sure we don’t pay more taxes than we owe. We’d get bigger refunds, but we’d be worse off because of it.
That certainly seems like their plan, with known mainstream figures like presidential hopeful Kamala Harris tweeting about how awful it is that fewer people are getting refunds.
In the 1980s, Democrats enthusiastically helped President Reagan pass his tax reforms, which made the tax system fairer and more efficient in addition to reducing rates.
Three decades later, not a single Democrat helped President Trump provide the same much-needed tax relief to middle class families, and politicians such as Kamala Harris are trying to pretend that people are worse off because their tax burden is now lower.
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It is clear that the radical left has taken over the Democratic Party, leaving behind the party of John F. Kennedy.
Smaller tax refunds are not a bad thing — they’re a sign that people are keeping more of their money as they earn it, rather than letting Uncle Sam keep it under his mattress for them.