Progressives are traditionally great at willfully misinforming the public, and this tax season is no exception. In fact, the talking points these days are mostly about how leading Democrats are spinning the facts regarding the President’s tax cuts.
One culprit is a widely circulated CNN article that falsely claims taxes for 2018 are up, stating:
“The average refund is down about 8% under the first full year of the overhauled tax code, according to data released by the IRS on Friday. Refunds averaged $1,865 compared to $2,035 for tax year 2017.”
While those facts are basically correct, the CNN article cleverly leaves out the reason why taxpayers are seeing lower refunds this year — the Trump tax cuts have reduced the percentage of federal withholding tax from paychecks, leaving workers with more weekly take-home pay. In short people are receiving smaller refunds because they paid fewer taxes during the year.
The Trump tax cuts are comprised of two basic principles, the first cutting the corporate tax rate from a high of 35% down to 21%, the second cutting individual income tax brackets for working Americans. Both of those basic principles have stimulated historic growths within our economy.
Cutting the corporate tax rate while in theory should reduce the amount of revenues the government takes in; however in actuality just the opposite is true. Cutting corporate tax rates incentives businesses to reinvest those tax dollars back into their businesses, expanding their market share, buying new equipment, hiring additional workers, and extending employee benefits, which eventually translates to a much larger percentage of revenues filtering into the nation’s Treasury.
The bogus claims made by David Cicilline the co-chairman of the Democratic Policy and Communications Committee citing that “80%” of the Trump tax cuts go to “corporations and the top 1%,” is patently false.
The Trump tax cuts benefit each income bracket relative to how much of the tax burden they shouldered “before the cuts”. For example before the tax cuts the bottom 80% of income earners paid roughly 33% of all federal income taxes, but received 35% of the benefits from the Trump tax cuts. The top 1% paid 27% of all federal taxes, and received only 21% of the tax cut, according to the center-left Tax Policy Center. In short the top 1% received less tax breaks compared to how much they paid in taxes.
Another area of concern for the President was the FICA Tax, and the amount of money being taken out of an individual’s paycheck by the government. The President reduced the tax, leaving more wage earners a larger amount of take-home pay, which also reduces income tax refunds.
However the biggest benefit regarding the President’s tax cuts are the automatic tax deductions. Under former President Obama a single individual filing a tax return received a $6,000 tax deduction, under the new tax cuts a single individual gets an automatic $12,000 tax deduction, that’s twice the amount.
Moreover if you’re a married couple under the Presidents new tax cuts, you go from a $12,000 tax deduction under Obama, to a $25,000 tax deduction under President Trump, again doubling the amount of tax deductions.
Perhaps the way to gauge the new tax cuts is to realize that an 8% decrease in your income tax refund, is actually the money you’ve been lending Uncle Sam for the entire year, coming back to you in one lump sum, while also receiving a weekly 8% bump in your paycheck.