AI
Saturday, February 09, 2019 6:29:43 PM
This from arizona1's, Why millions of people are getting hit with a surprise tax bill this year
"I'm a CPA with a small tax practice"
An effort to make the tax bill look better ended up making it look worse.
By Matthew Yglesias@mattyglesiasmatt@vox.com Feb 6, 2019, 2:10pm EST
[...]
How the tax law changed withholding
The 2017 Tax Cuts and Jobs Act was largely focused on reducing taxes for rich business owners. People who are stand to inherit multi-million dollar estates got an enormous tax cut, as did people who own “small” businesses that generate millions of dollars in annual profits. And, of course, there was a big cut in the corporate income tax rate, with benefits largely flowing through to stock owners in a country where 80 percent of the value of the stock market is owned by the richest 10 percent of the population.
But there were changes for middle-class workers, too.
Most famously, TCJA either eliminated or curbed a whole bunch of popular tax deductions (including the home mortgage interest deduction and the state and local tax deduction) while also repealing a previously implemented phase-out of itemized deductions. Consequently, the value of most people’s tax deductions went down but some people got to deduct more. Then to compensate for these lost tax deductions, the Child Tax Credit got more generous and was also given to richer people and the standard deduction got much bigger. Individual tax rates, in turn, went down.
In the aggregate, this means higher taxes for a few people but lower taxes for the vast majority of Americans. It also means that virtually everyone’s tax situation is a little bit different from before, often in complicated ways related to the ins and outs of lost and gained deductions and credits. So everyone’s withholdings had to be calculated anew.
The bill was also extremely unpopular. But Republicans spent December 2017 assuring themselves that would change in February 2018 when the new withholdings began.
“On January 1, Americans are going to wake up with a new tax code,” Ryan said .. https://www.realclearpolitics.com/video/2017/12/19/paul_ryan_with_tax_bill_passage_americans_will_see_larger_paychecks_in_february.html . “On February 1, they are going to see withholdings go down, so they are going to see bigger paychecks.”
Trump tweeted something similar.
FOX Business
@FoxBusiness
.@POTUS: If Congress sends me a bill before Christmas,
Americans will see lower taxes beginning in February. Just two short months from now.
807
7:21 AM - Dec 14, 201
This immediately lead the eagle-eyed David Dayen at the Nation .. https://www.thenation.com/article/how-the-trump-administration-could-game-paychecks-to-win-support-for-the-tax-bill/ .. to wonder whether Trump was planning to have his acting IRS commissioner (a political person rather than a tax enforcement professional, in an unusual choice to run the agency) deliberately reduce the withholdings to exaggerate the impact of the tax cut on people’s pocketbooks in advance of the midterms.
Since his article 14 months ago, no clear evidence of political manipulation has emerged. [Not yet.] But the July GAO report confirmed that this is indeed what happened — both taxes owed and withholdings went down, but withholdings went down too much. .. https://www.forbes.com/sites/kellyphillipserb/2018/08/04/report-suggests-more-taxpayers-will-owe-tax-in-2019-due-to-withholding/#837f3e65f0f4 .
Treasury says the new system is more accurate
According to the GAO’s estimates, the number of people whose withholdings are exactly right will stay roughly the same under the new system.
The change is that fewer taxpayers should be overwithholding and more should be under withholding — in other words, fewer people will get a refund and more people will be asked to pay up.
Treasury’s viewpoint is that this is change for the better. Under the old system, 75 percent of taxpayers were getting refunds — meaning that the withholding system was poorly targeted on average. By switching to a new system in which fewer people get refunds and more people owe extra money, they will be achieving a more balanced result.
If this was intended to give Republicans a boost in the midterms it obviously didn’t work, in part because the once-a-year tax filing process is a lot more salient than the biweekly process of automatic withholding. In fact, they are now facing a backlash from an angry public that includes millions of people who were expecting tax refunds that they are now not going to get.
It’s actually the case that in the long run TCJA will raise many working- and middle-class people’s taxes. To conform to budget reconciliation rules, Republicans made it so the nonregressive tax cuts largely expire after 10 years while the revenue-raisers and the business tax cuts are permanent. But while this is an important (and telling) part of the tax policy debate, it doesn’t represent anything that’s happening this winter. People hit with a surprise request to pay extra to the IRS may feel like Trump surprisingly raised their taxes, but in most cases that’s not what’s happening.
The above is outed from - You can read real people who have already filed their taxes here.
https://www.vox.com/policy-and-politics/2019/2/6/18214039/irs-tax-refund-withholding-trump
.. this post .. https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146672308
Damn good explanation, which should answer most of the why?s around.
"I'm a CPA with a small tax practice"
An effort to make the tax bill look better ended up making it look worse.
By Matthew Yglesias@mattyglesiasmatt@vox.com Feb 6, 2019, 2:10pm EST
[...]
How the tax law changed withholding
The 2017 Tax Cuts and Jobs Act was largely focused on reducing taxes for rich business owners. People who are stand to inherit multi-million dollar estates got an enormous tax cut, as did people who own “small” businesses that generate millions of dollars in annual profits. And, of course, there was a big cut in the corporate income tax rate, with benefits largely flowing through to stock owners in a country where 80 percent of the value of the stock market is owned by the richest 10 percent of the population.
But there were changes for middle-class workers, too.
Most famously, TCJA either eliminated or curbed a whole bunch of popular tax deductions (including the home mortgage interest deduction and the state and local tax deduction) while also repealing a previously implemented phase-out of itemized deductions. Consequently, the value of most people’s tax deductions went down but some people got to deduct more. Then to compensate for these lost tax deductions, the Child Tax Credit got more generous and was also given to richer people and the standard deduction got much bigger. Individual tax rates, in turn, went down.
In the aggregate, this means higher taxes for a few people but lower taxes for the vast majority of Americans. It also means that virtually everyone’s tax situation is a little bit different from before, often in complicated ways related to the ins and outs of lost and gained deductions and credits. So everyone’s withholdings had to be calculated anew.
The bill was also extremely unpopular. But Republicans spent December 2017 assuring themselves that would change in February 2018 when the new withholdings began.
“On January 1, Americans are going to wake up with a new tax code,” Ryan said .. https://www.realclearpolitics.com/video/2017/12/19/paul_ryan_with_tax_bill_passage_americans_will_see_larger_paychecks_in_february.html . “On February 1, they are going to see withholdings go down, so they are going to see bigger paychecks.”
Trump tweeted something similar.
FOX Business
@FoxBusiness
.@POTUS: If Congress sends me a bill before Christmas,
Americans will see lower taxes beginning in February. Just two short months from now.
807
7:21 AM - Dec 14, 201
This immediately lead the eagle-eyed David Dayen at the Nation .. https://www.thenation.com/article/how-the-trump-administration-could-game-paychecks-to-win-support-for-the-tax-bill/ .. to wonder whether Trump was planning to have his acting IRS commissioner (a political person rather than a tax enforcement professional, in an unusual choice to run the agency) deliberately reduce the withholdings to exaggerate the impact of the tax cut on people’s pocketbooks in advance of the midterms.
Since his article 14 months ago, no clear evidence of political manipulation has emerged. [Not yet.] But the July GAO report confirmed that this is indeed what happened — both taxes owed and withholdings went down, but withholdings went down too much. .. https://www.forbes.com/sites/kellyphillipserb/2018/08/04/report-suggests-more-taxpayers-will-owe-tax-in-2019-due-to-withholding/#837f3e65f0f4 .
Treasury says the new system is more accurate
According to the GAO’s estimates, the number of people whose withholdings are exactly right will stay roughly the same under the new system.
The change is that fewer taxpayers should be overwithholding and more should be under withholding — in other words, fewer people will get a refund and more people will be asked to pay up.
Treasury’s viewpoint is that this is change for the better. Under the old system, 75 percent of taxpayers were getting refunds — meaning that the withholding system was poorly targeted on average. By switching to a new system in which fewer people get refunds and more people owe extra money, they will be achieving a more balanced result.
If this was intended to give Republicans a boost in the midterms it obviously didn’t work, in part because the once-a-year tax filing process is a lot more salient than the biweekly process of automatic withholding. In fact, they are now facing a backlash from an angry public that includes millions of people who were expecting tax refunds that they are now not going to get.
It’s actually the case that in the long run TCJA will raise many working- and middle-class people’s taxes. To conform to budget reconciliation rules, Republicans made it so the nonregressive tax cuts largely expire after 10 years while the revenue-raisers and the business tax cuts are permanent. But while this is an important (and telling) part of the tax policy debate, it doesn’t represent anything that’s happening this winter. People hit with a surprise request to pay extra to the IRS may feel like Trump surprisingly raised their taxes, but in most cases that’s not what’s happening.
The above is outed from - You can read real people who have already filed their taxes here.
https://www.vox.com/policy-and-politics/2019/2/6/18214039/irs-tax-refund-withholding-trump
.. this post .. https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146672308
Damn good explanation, which should answer most of the why?s around.
It was Plato who said, “He, O men, is the wisest, who like Socrates, knows that his wisdom is in truth worth nothing”
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