Shrink­ing tax re­funds sur­pris­ing, an­ger­ing Amer­i­cans

Santa Fe New Mexican - - FRONT PAGE - By Heather Long

Mil­lions of Amer­i­cans filling out their 2018 taxes will prob­a­bly be sur­prised to learn that their re­fund will be less than ex­pected or that they owe money to the In­ter­nal Rev­enue Ser­vice af­ter years of re­ceiv­ing re­funds.

Peo­ple have taken to so­cial me­dia, us­ing the hash­tag GOPTaxS­cam, to vent their anger. Many are blam­ing Pres­i­dent Don­ald Trump and Repub­li­cans for their shrink­ing re­fund. Some on Twit­ter have even said they voted for Trump but won’t do so again af­ter see­ing their re­fund slashed.

The up­roar comes af­ter Trump and con­gres­sional Repub­li­cans passed a ma­jor over­haul of the tax code in De­cem­ber 2017, the big­gest leg­isla­tive achieve­ment of the pres­i­dent’s first year. While the vast ma­jor­ity of Amer­i­cans did get a tax cut in 2018, re­funds are a dif­fer­ent mat­ter. Some re­funds have de­creased be­cause of the changes in the tax code made by the law, such as a new limit on prop­erty and lo­cal in­come tax de­duc­tions, and some have de­creased be­cause of how the IRS has al­tered with­hold­ing in pay­checks.

John Prugh of Ewing Town­ship, N.J., was irate when he com­pleted his 2018 tax re­turn this month and dis­cov­ered his re­fund would be $3,000 less than what he re­ceived last year. Prugh con­sid­ers him­self “solidly mid­dle class.”

The 39-year-old is a man­ager at a Barnes & No­ble Book­store, and his wife works for the state govern­ment. They have two chil­dren. Prugh said he had no rea­son to think their tax sit­u­a­tion would change this year, since he and his wife have lived in the same house for years and have re­ceived about the same pay in their jobs and have two kids.

“It to­tally feels like a scam,” said Prugh, who did not vote for Trump. “I did still get a small re­fund, but com­pared to what I was ex­pect­ing from pre­vi­ous years, it was shock.”

The av­er­age tax re­fund check is down 8 per­cent ($170) this year ver­sus last, the IRS re­ported Fri­day, and the num­ber of peo­ple re­ceiv­ing a re­fund has dropped by al­most a quar­ter.

An IRS spokesman said not to read much into this early data be­cause it only re­flects re­turns pro­cessed through Feb. 1, and the par­tial govern­ment shut­down caused some de­lays in pro­cess­ing fil­ings. The early data can shift around a lot, tax ex­perts say, but there’s rea­son to be­lieve frus­tra­tions could rise as more Amer­i­cans com­plete their tax re­turns. The Govern­ment Ac­count­abil­ity Of­fice warned last sum­mer that the num­ber of tax fil­ers who re­ceive re­funds was to drop for the 2018 tax year and the num­ber of fil­ers who owe money would rise.

The GAO pointed to an IRS es­ti­mate that about 4.6 mil­lion fewer fil­ers would re­ceive re­funds this tax fil­ing sea­son. An­other 4.6 mil­lion fil­ers were likely to owe money who hadn’t had that ex­pe­ri­ence in the past.

There is no es­ti­mate for how many peo­ple will still re­ceive a re­fund but a smaller one than be­fore.

Many Amer­i­cans may con­fuse their small re­fund as a sign that they paid more in taxes as a re­sult of the Tax Cuts and Jobs Act. Gen­er­ally, that is not true.

Ac­cord­ing to the Tax Pol­icy Cen­ter, 80 per­cent of fil­ers re­ceived a tax cut and about 5 per­cent wound up pay­ing more in fed­eral in­come taxes. The tax cuts showed up in fat­ter weekly or bi­weekly pay­checks for most Amer­i­cans, but few peo­ple no­ticed, ac­cord­ing to polling.

“There’s a dif­fer­ence be­tween taxes and your re­fund,” said Joseph Rosen­berg, a se­nior re­search as­so­ciate at the Ur­ban-Brook­ings Tax Pol­icy Cen­ter at the Ur­ban In­sti­tute. “Peo­ple gen­er­ally got a piece of their tax cut last year grad­u­ally in the form of lower with­hold­ing on their pay­checks.”

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