Paul L. Caron
Dean


Friday, April 19, 2019

NY Times: The Impact Of The Trump Tax Cuts On Individuals, Businesses

New York Times, On the Last Day to File Taxes, Here’s How the Trump Tax Cut Unfolded:

While tax cuts are arguably one of the Trump administration’s biggest achievements to date, and businesses have been celebrating the profit windfall they received from a lowering of corporate rates, many Americans seem not to have noticed that individual taxes also fell.

Chalk that up to an early drop in the size of tax refunds for some, and the fact that, divided over a year’s worth of paychecks, the tax benefit may not have seemed consequential.

Now that the effects of the tax act are becoming clearer, here are some early conclusions about its impact on people and businesses:

Individuals Owed Less, but Did They Notice? ...

NYT1

Business Did What Business Does ...

NYT2

https://taxprof.typepad.com/taxprof_blog/2019/04/ny-times-the-impact-of-the-trump-tax-cuts-on-individuals-businesses.html

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Comments

Hi Paul,
I agree with the statement that the tax difference spread over a year's worth of paychecks starts to make the tax benefits of tax reform feel small. What would make a big difference is if the average taxpayer adjusted their withholdings so that they neither receive a refund or owe. Combine this with the tax reform and the average taxpayer will notice a sizeable difference in their paycheck throughout the year instead of receiving the one-time lump sum refund at the end of the year.

Posted by: GP | Apr 20, 2019 7:11:41 PM

Perhaps behavioral economists could explain to us what makes most taxpayers feel their taxes have been increased when taxes in fact have been cut and the IRS adjusts withholding to provide more take home pay but a lower refund.
Most likely wage earners are not easily able to sort out the multitude of factors that impacts take home in different pay periods (e.g. salary increase, bonus, overtime, increases in contributions for benefits such as health insurance, changes in state and federal taxes, etc.). Add to that the fact that most wage earners find themselves unable to cope with large unexpected events (even a $400 emergency is too much for about 40%) and must opt for more expensive monthly or quarterly payments for car and household insurance, and we can come to understand how larger withholding that results in a larger refund is valued by many taxpayers. Most readers of this blog earn too much money to really understand, based on personal experience, how most taxpayers likely appraise things differently from the way that we do.

Posted by: Bill | Apr 21, 2019 7:01:05 AM