In every income category surveyed recently by the New York Times collaborating with the Tax Policy Center, a majority of Americans thought they had not received a tax cut from the Tax Cuts and Jobs Act of 2017. The reality is, the majority of Americans in nearly every category received a tax cut. Bill Bischoff at MarketWatch explains why so many Americans haven’t noticed their tax cuts. He writes:
An online survey conducted for The New York Times and published in April of 2019 (after most returns for the 2018 tax year had been filed) found that only 40% of Americans believed they had received a tax cut under the TCJA. Only 20% were certain they had received one. A large minority thought their taxes had actually gone up.
To the contrary, a study conducted by the Tax Policy Center found that 65% of households actually got a tax cut in 2018, while only 6% paid more. The rest saw little or no change in their tax bills. More specifically, the New York Times survey and the Tax Policy Center study show the following contradictory results:
Household Income Got a tax cut Think they got a tax cut Under $30,000 32.1% 30.0% $30,000 – $50,000 69.1% 36.1% $50,000 – $75,000 81.7% 41.5% $75,000 – $100,000 86.6% 47.9% Over $100,000 89.5% 46.4%
As you can see, perceptions overrode reality at all income levels. Even many upper-income folks who were highly likely to have gotten a tax cut did not believe it. Because the TCJA changes were fully phased in for the 2018 tax year, we would expect the “actually-got-a-tax-cut” percentages for 2019 to be about the same as for 2018. Whether perceptions will change after 2019 returns have been filed remains to be seen.
Why the big disconnect?
One reason for the large disconnect between tax cut perceptions and tax cut reality for the 2018 tax year: The updated federal income tax withholding tables used by employers in 2018.
The new withholding levels resulted in lower 2018 refunds for many. Most of these folks actually paid lower taxes for the year, but received lower-than-expected refunds after filing their 2018 returns. For the many who depend on tax refunds for an annual “Spring Bonus,” lower-than-expected refunds felt like tax increases.
While most 2018 tax bills were actually lower overall than for 2017, it didn’t feel that way at tax return time. Employer tax withholding tables were adjusted for 2019, so tax refunds collected during this year’s filing season may be more in line with expectations.
Read more here.