The Government Made a Huge Decision Affecting Millions of Americans' Taxes. Here's Why So Few People Even Noticed

Fellow humans, we’re beautiful. But we’re not always logical.

We should take pride in that. It explains some things, too. Like, why we’re all getting upset over taxes right now — really as a result of something the Trump administration apparently did a full year ago, and that almost nobody really noticed at the time. 

Let’s back up a second. You’ve probably heard that millions of Americans are surprised to find they have a higher tax bill this year than last year. Or maybe they’re getting a refund, but it’s smaller than in 2018.

This is despite the fact that 2018 was supposed to be the year of the great big tax cut. The IRS says the average refund check is down $ 170 so far, which is about eight percent smaller than last year. 

Now, you might be quick to point out that many Americans already got their tax cut, parceled out bit by bit with each paycheck in 2018. If they didn’t adjust their withholding in a way to cover all the taxes they owed; well, that’s on them. 

Spend a little time on Twitter, or in the comments section of the stories about this on almost every major news site right now, and that’s what you’ll find:

  • A bevy of middle-class Americans, some of whom say they voted for Trump, complaining that their tax refunds are tiny or they actually owe taxes this year after never owing before.
  • And, an equally sized group calling them out for supposedly not understanding how withholding works — and pointing out that owing taxes ultimately means they should feel happy for not having given the government an interest-free loan.

There’s just one little issue. And it’s that if you looking into the archives, you can see that citizens withholding too little money from their taxes during 2018 wasn’t a mistake. It was more like a plan.

Take a look at what Brian Faler, senior tax reporter at Politico was writing about in January 2018.

The president had just signed the 2017 tax law, literally on the Friday afternoon before Christmas. And moving quickly, the IRS had to figure out how to readjust tax tables to tell businesses how much to withhold from employees’ checks.

“The agency is under pressure to take as little as possible so people will see big increases in their take-home pay ahead of [the 2018] midterm elections,” Faler wrote at the time. “But that would come at a cost: smaller or even nonexistent refunds next year, though millions rely on them to plug holes in their family budgets.”

Next year is now, of course. Many of the 80 percent of Americans who supposedly got a tax cut have already seen its entire benefit. It just dripped out in small enough pieces that they hardly noticed.

But, if your business relies them spending their tax refunds in February and March, you’ll notice for sure.  

Here’s what else I’m reading today:

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Inc.com

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