Faster Tax Cuts Could Be Backfiring on Republicans

Bigger paychecks for most — but smaller refunds for some

Independent analyses consistently show that the 2017 law gave most Americans a tax cut, and few families will end up paying more than under the previous rules.

Federal officials faced a choice about how to pass those savings on to taxpayers. One option would have been to make most people wait until they filed tax returns this spring, delivering a tax-season windfall but essentially delaying the cut by a year.

Instead, the I.R.S. chose to begin withholding less from workers’ paychecks early last year. That put more money in workers’ pockets right away, but made the effects of the tax cut harder to see, since the savings amounted to just a few dollars per pay period for many people.

Administration officials said this week that they stood by their decisions on how to update withholding tables. They said their goal was to make the tables as accurate as possible, and to encourage taxpayers to use a calculator on the I.R.S. website to estimate their liability or refund at the end of the year and decide whether to change how much was being withheld.

But for some people, the I.R.S. decision has resulted in a nasty shock come tax season. The new law made numerous changes to the tax code — eliminating and capping some deductions and credits while increasing others — and the revised withholding rules did not account for every situation. As a result, government auditors warned last year that the withholding changes would reduce refunds for several million Americans.

It is not yet clear how many Americans will end up paying more. As of last week, I.R.S. statistics showed that the average refund had not changed for those who had filed. But total filings were down, and the share of returns producing a refund had declined by 0.5 percentage points, or about 300,000 filers. (Experts caution against reading too much into tax statistics before the April filing deadline.)

“You can see people potentially being frustrated if the tax season isn’t playing out the way they expected,” said Michelle Meyer, chief United States economist for Bank of America Merrill Lynch. “Other people might be quite pleased. It is quite split how people are being impacted by the tax cut.”

Article source: https://www.nytimes.com/2019/03/21/business/economy/tax-refund-republicans.html?partner=rss&emc=rss