Sigh. As a Tax Professional who despises the new tax law, and has written about it on DK here and here back when it passed in December of 2017 (both were shared a combined 8,000+ on Facebook, thanks!), I feel like something needs explaining.
I understand that many people use their tax refunds as forced savings. There is a diary here on DK this morning, for example, and links to dozens of tweets from people who are disappointed/outraged by their lower refund this year, or that they owe when they expected a refund. The outrage is palpable. Getting large refunds is a way to count on a certain amount of money coming in a lump sum at a set time so that you can pay for certain things. I get that. I see that hundreds of times a year. And when it doesn’t come as expected, people can be upset. People count on that money.
That said, your refund is just your change. The government doesn’t send you money because they like you. The government sends you back money because you gave them too much to begin with.
Imagine that you, me and your best friend went to a cafe, and each ordered a large latte for $4 (I usually use Starbucks in this example, and a Venti latte, but until Mr. Schultz makes it clear he is not running, I will go generic here). When we sit down, you say that you got $6 change. Your friend says, “Wow, you got ripped off. I got $16 change!” I say, “That’s strange, they asked me for a dollar more.”
What happened? You gave the cashier a $10, your friend gave the cashier a $20, and I gave the cashier $3. Whether we got money back or owed more depends on how much we paid in advance. The cost was still $4, to each of us, no matter how much we gave to the cashier.
If your tax on your return is $10,000, then your tax is $10,000. If you paid in $10,001, you have a dollar refund coming to you. If you paid in $9,999, you will owe a dollar more. Your tax is your tax.
Some people have a higher tax this year and are getting a higher refund. Some have a lower tax this year, but still owe money.
The tax is the tax, regardless of how much you paid in advance or not.
I write this NOT to defend the new tax law. My take on the law is clear. I write, in one of these articles:
This is a draconian tax bill for employees. it creates incentives for self-employment, which means that we will see more and more people look to work for themselves, and companies and corporations already have incentive to hire sub-contractors instead of employees to avoid paying benefits. Without the mandate to have insurance, health care premiums will go up, and self-employed people will have to bear the cost without employer subsidies.
I continue:
It will particularly hurt wage-earners, you who are employees. It will specifically hurt police, fire fighters, nurses and teachers. Why? Because it eliminates employee business expenses. Teachers can take $250 of deductions, but "Masters plus 30" education — teachers can get raises up to 30 hours past their Masters Degree — will no longer be deductible if you earn more than $65,000 as a single person or $130,000 as a married couple. In other words, education you pay for on your own dime to become better at your job — any job — will no longer be deductible starting January 1st. You can take the Lifetime Learning Credit, but it phases out completely at these income levels. Starting in 2018, classroom supplies, photocopies, incentives, classroom decorations, class parties, union dues are all gone. Police, nurses and firefighters, who previously deducted uniforms and equipment, you can kiss that goodbye, along with union dues. Carpenters and electricians can no longer deduct equipment, tools and supplies.
I end that piece with:
Make no mistake. This law Is designed to benefit the Republican donor class, who have threatened to cut off funding unless and until this has passed. It also is insidiously designed to social engineer our society, away from wage earners and the benefits that employers are obligated to provide, to become an increasingly non-union and non-employee based economy of contractors and sub-contractors, with no benefits, sick pay, family leave, unemployment insurance, workers compensation, or vacation pay.
And, of course, no health insurance.
And still, the debt will grow by trillions....
And, your tax is your tax. It matters less what you get back than what you leave them….