Tax Day is always bad because Americans are overtaxed. But this Tax Day, we can celebrate the fact that an overwhelming majority of people are being taxed less, thanks to the Tax Cuts and Jobs Act, which Republicans passed in late 2017.
The sound and fury over this legislation was deafening. There was a deliberate attempt to trick the public into believing the bill was a middle-class tax increase. Most big media outlets were duped by this Democratic propaganda campaign, or went along with it willingly. As a result, most taxpayers assumed the bill would dip deeper into their bank accounts. It didn’t help that Republicans passed the bill in a haphazard way at the very end of 2017.
But the truth is clear enough this Tax Day. Despite a spate of deliberately misleading stories about smaller refunds, despite declarations of “Armageddon,” and despite blatant falsehoods that this wasn’t a middle-class tax cut, honest men and women have to admit that taxpayers are keeping more of what they earned last year than they did in previous years.
No fewer than four out of every five taxpayers saw a reduction thanks to the law. The median cut was more than $1,000, and in many states it was $1,400. Families with children enjoyed a bigger tax cut thanks to the increase of the child tax credit combined with lower rates.
Lower taxes for individuals and families means more freedom and more wealth.
Almost as importantly, Tax Day was less of a hassle for most people because filing became simpler. In 2017, more than 46 million tax filers itemized their taxes. That dropped to 18 million in 2018.
Simpler filing not only saves time, it also reduces distortions by the tax code. Tax deductions steer spending and investment toward politically favored activities, such as taking out mortgages. By nearly doubling the standard deduction, the 2017 tax reform dramatically reduced the number of people tempted to make decisions in search of tax breaks. That’s good for the economy.
The small percentage of people who saw a tax hike, as opposed to the large number fooled by journalists into thinking their smaller refunds meant higher taxes, were high-income taxpayers who leaned heavily on special tax breaks for the expensive homes and their high state and local taxes. The tax reform capped state and local tax deductions at $10,000 for a couple, and it trimmed mortgage deductions on homes with mortgages greater than $750,000, purchased after 2017.
Democrats saw these last two reforms, which curb tax breaks only for the wealthy, as a political opportunity. “In California,” wrote Sen. Dianne Feinstein of her state, “seven counties have average home prices that are more than $750,000.”
According to Zillow, the median four-bedroom home costs $825,000 in Orange County, Calif. Assuming a 10% down payment, the average new mortgage would be below $750,000. So the tax hike bemoaned by multimillionaire Feinstein would be targeted at five bedrooms or more in the wealthiest enclaves of America.
In 2018, Democrats went to bat for these oppressed wealthy folks with high property taxes and highly leveraged mansions in Bucks County, Pa., and Orange County. Sure enough, Democrats picked up a few dozen seats in high-income, high-home value, high-tax places.
Just as taking away people’s health insurance probably cost Democrats their majority in 2010, shrinking wealthy people’s tax breaks helped cost Republicans their House majority in 2018.
Politically costly, yes, in part thanks to the deceptive press coverage, but economically helpful. The economy has grown more because of the tax break. More importantly, freedom has grown, too.
So compared to most years, we wish you a happy Tax Day.
