Though the far-reaching new tax law shrunk many Americans’ tax bills, some were disappointed by middling refunds that didn’t increase all that much from a year earlier.
But new data from the Internal Revenue Service shows that pattern didn’t apply to everyone — people making between $250,000 and $1 million likely saw their refunds increase, according to new IRS statistics.
As of late May, the federal government had refunded taxpayers $306 billion for their overpayments in the first year the Tax Cuts and Jobs Act took effect. The feds paid out $311 billion in refunds at the same time last year.
Despite the drop in the overall refund sum, taxpayers with adjusted gross incomes between $250,000 and $500,000 were refunded $14.6 billion this year, compared to $10.6 billion last year.
Likewise, taxpayers with adjusted gross incomes between $500,000 and $1 million were refunded $6.1 billion, which was up from the $5.2 billion a year earlier.
Meanwhile, taxpayers making between $100,000 and $200,000 were refunded $44.1 billion this year. That’s down from $49.7 billion a year earlier. With some exceptions, refunds were slightly lower this year for earners making less than $100,000.
The new IRS information on refunds — along with its data on reduced overall liabilities — could be another round of ammunition for the law’s critics and supporters. The tax law passed in 2017 solely with Republican votes, while Democrats criticized it as tilted towards the rich and businesses.
Still, a focus on refunds only reveals so much. The Treasury Department has noted that more taxpayers saw increased paychecks throughout the year and some observers say the smaller refunds are also explained by too few taxpayers updating the withholding amounts on their paychecks.
Furthermore, the law’s supporters emphasize Americans are getting taxed a lot less. The total liability for individual taxpayers this year was $1.048 trillion, according to the IRS data. It was $1.113 trillion a year earlier.
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The latest IRS data runs through May 23, but the agency has anticipated a record 14.6 million extension requests. Many extensions come from high-income taxpayers with complicated tax situations, said Mark Mazur of the Urban-Brookings Tax Policy Center.
Mazur said in the big picture, tax liabilities were more important for the country’s economy compared to things like refund amounts and tax bills due at the time of filing. But refunds and tax bills are important for the cash flow of a family getting by day-to-day, he said.
About 24.3 million returns owed money when filing this year, up from 23.1 million in 2018. That figure is slightly up from a recent IRS watchdog report looking at who had balances due as of late April. Taxpayers this year were slammed with $2.5 billion more in taxes due at filing, compared to 2018.
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The new tax law “made the progressive U.S. tax system a little less progressive and a little less effective at addressing income inequality,” Mazur said. The new data didn’t change his views, Mazur said, adding that the country’s debts couldn’t afford smaller tax revenue.
But Nicole Kaeding, vice president of federal and special projects at the Tax Foundation, said the tax overhaul was “historic, but not perfect. I think there is a lot to like within the context of the bill, but there are provisions that I think were far from ideal.”
Refunds were a less important part of the picture, she said. “Taxes are down for every income group, as predicted. However, that doesn’t mean that every individual’s taxes went down,” Kaeding noted.
Source : MTV
