Tax day, the final day to file a tax return for 2018 without an extension, has left many taxpayers scratching their heads about the “massive tax cuts” promised by President Donald Trump. Although experts say two-thirds of Americans got such a reduction, most taxpayers say they haven’t seen one.
About 7 of 10 taxpayers toldthey either saw no change or are paying more in taxes because of the Tax Cuts and Jobs Act, the sweeping tax overhaul that was signed into law by Mr. Trump at the end of 2017. With the provisions taking effect last year, taxpayers are now tallying their final accounting and, in many cases, wondering what happened to the tax cuts touted by Mr. Trump and GOP lawmakers.
The issue may boil down to size. The typical middle-income taxpayer saw their 2018 taxes decrease by only about $1,000, or roughly $20 a week, according to an analysis from the nonpartisan Tax Policy Center. That may explain why most Americans feel they haven’t received a tax cut — it’s too small for people to notice.
More than 6 in 10 Americans told CBS News they think large corporations and wealthy people benefited from the tax overhaul. And there’s something to their gut instinct: The top 1 percent of income earners received an average tax cut of $51,310 last year, or more than $900 per week, the Tax Policy Center said in its analysis. And big companies received a massive tax cut, with the corporate tax rate slashed to 21 percent from 35 percent.
A penny richer
Those disparities, and anecdotes about taxpayers getting hit by certain provisions of the Tax Cuts and Jobs Act, is sparking debate about whether the tax overhaul is delivering the benefits promised by GOP lawmakers.
It’s not only individual taxes that are facing scrutiny, but also the idea that lower corporate tax rates “trickle down” to average Americans. The tax law’s backers said that slashing corporate rates would allow businesses to raise wages, increase bonuses and hire more workers.
But the evidence doesn’t support this, some economists say. Bonuses for workers rose only one penny last year, according to Lawrence Mishel, distinguished fellow at the left-leaning Economic Policy Center.
“This is not what the tax cutters promised, or bragged about soon after the tax bill passed,” Mishel wrote in a blog post about the analysis. “They claimed that their bill would raise the wages of rank-and-file workers, with congressional Republicans and members of the Trump administration promising raises of many thousands of dollars within ten years.”
How to tell if you’re winning
Even if taxpayers didn’t get a tax refund this year, they might still be better off than in previous years. The best way to gauge if you’re coming out ahead is to determine what’s known as your “effective” tax rate, a percentage that represents how much of your annual income was paid in taxes.
To check, you’ll need to calculate your effective tax rate for 2017. That can be determined by finding your total income on line 22 of your IRS Form 1040 from last year. Then look on page 2, line 63, which provides your total tax. Divide your total tax amount by total income and you’ll determine your effective tax rate.
The Form 1040 for this year’s tax season has a slightly different format. Total income will be listed on line 6, and total tax is on line 15. Do the same calculation to determine your effective tax rate under the new law.
If you aren’t able to finish your tax returns by midnight on April 15, you aren’t alone. Nearly one-third of the tax returns expected to be filed this year had not been filed by April 6 (the most recent date for which IRS data are available). In that case, taxpayers may want to , which can typically be done in a few minutes, tax experts say.
First published on April 15, 2019 / 2:46 PM
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