Convincing low- and middle-income Americans that President Trump’s tax cut saved them money was hard enough when Internal Revenue Service statistics showed refunds were shrinking.
Now, the data poses an additional problem: Average payments made to the agency when taxpayers filed their returns have increased, based on as-yet incomplete figures.
Total refunds fell 2.6% to $220.7 billion through the first week in April, according to IRS statistics, and Swiss lender UBS used Treasury Department numbers to place tax payments at $90 billion through late March, slightly above last year’s. Both are likely to irk voters as well as curb consumer spending, though the effects will vary.
“Increased payments, to the extent the trend holds up over the next two weeks, will have a less immediate effect” on consumer spending than the smaller refunds, said UBS economist Robert Martin. “Households making payments are less likely than refund households to determine their near-term spending plans on the size of their payment.”
While the shifts reveal nothing about the overall size of the tax cuts, which Trump has described as “massive,” they do affect voters’ perceptions and may make claims by Democrats that a tax cut passed with only GOP support favored the wealthy appear more persuasive.
Party candidates seeking to unseat Trump and reclaim control of the Senate have bitterly criticized the late 2017 tax bill’s sizable reduction in the top corporate rate, which dropped from 35% to 21%. Presidential contender Sen. Kamala Harris, D-Calif., called the bill a “middle-class tax hike to line the pockets of already wealthy corporations and the 1%.”
Some 74% of respondents in a CBS poll said the new law either made no impact on their tax bill or forced them to pay more, and research by the Pew Center indicated that only 36 percent of Americans like it, while 49% disapprove.
The dissatisfaction may stem from disparities in the size of cuts. While the tax bill for 80% of payers fell, it shrank by just 0.8 percent for those in the bottom fifth of household incomes and by 2.9% for people in the top fifth, according to the Tax Policy Center, a partnership of the Urban Institute and the Brookings Institution.
Due to changes in withholding, most of the benefit appeared in paychecks spread over a full 52 weeks, where it was less apparent than it might have been in a large refund.
Nonetheless, Sen. Chuck Grassley, R-Iowa, noted that the typical family of four earning the median income of $76,000 saw their tax bill drop by $2,149.
“We promised that these tax cuts would be rocket fuel for the economy, and we were absolutely right,” Trump said in a speech at an industrial equipment supplier in Burnsville, Minn., on Monday, the deadline for individual taxpayers to file their returns.
Unemployment in March was 3.8%, near a 50-year low, and hourly wages were 3.2% higher than the year before.
“People are receiving pay raises all across the country,” Trump said. “That really is a great thing.”
