Democrats see early statistics showing declining refunds this tax filing season as an opportunity to attack the 2017 Republican tax overhaul as a giveaway to the rich at the expense of the middle class.
The tax cuts lowered the amount withheld from each paycheck for most taxpayers, cutting their taxes but also raising the possibility that, when they file their taxes, their refund will be smaller.
Even though they may be paying less taxes overall, taxpayers might resent getting a smaller lump refund — or having to pay a larger bill to tax collectors.
Internal Revenue Service statistics show that the number of tax refunds has fallen 25 percent as of Feb. 2 and that the average size of refund has fallen 8.5 percent. It’s not clear yet whether that trend will hold for the entire filing season, which extends until mid-April.
Still, Democrats are jumping on those early numbers to attack the tax law and suggest that it is hurting taxpayers.
“What is striking right now is that the multinational corporations and the 1 percent got billions of dollars in tax relief,” said Sen. Ron Wyden D-Ore., the top Democrat on the Senate Finance Committee. “Working-class people are really seeing that the law, which I led the opposition to here in the Senate, really hurt them in a number of particulars.”
Republicans acknowledge that there’s some anxiety that what they sold as a giant gift to the American people won’t be received as kindly because of lower refunds, even if taxpayers are better off.
“I do think there’s confusion, and because of the government shutdown and because of the change in the tax laws there’s a lot of nervousness around the tax season,” said Sen. Rob Portman R-Ohio, a senior member of the the Senate Finance Committee. “I’m told confidently by Treasury everything is going to be OK, everything’s going to work, but I do think there is some understandable concern.”
Portman noted, though, that most people are getting tax cuts, even if they are seeing less of a refund. “They didn’t have a tax rate that was as high and were able to take the standard deduction at double the level,” he said. “It helps the vast majority of middle-income taxpayers in Ohio.”
The effect of those tax cuts on the middle class figures to be a major point of litigation in 2020 campaigns.
“The average tax refund is down about $170 compared to last year,” Sen. Kamala Harris, D-Calif., a candidate for president, tweeted Monday. “Let’s call the President’s tax cut what it is: a middle-class tax hike to line the pockets of already wealthy corporations and the 1%.”
Harris has said she would seek to roll back the tax cuts for those making more than $100,000 per year if elected president. Other Democrats, such as Sen. Elizabeth Warren, D-Mass., also see an opening created by the tax law to argue for higher taxes on the wealthy and more policies aimed at lessening income inequality.
It remains to be seen whether the tax season confusion shifts public opinion. Recent polling on the law from late January and early February, by CNN and the Economist/YouGov respectively, places approval for the law a bit above disapproval or about the same as dispproval.
“That’s basically Trump approval right there,” said Liam Donovan, a former staffer for the National Republican Senatorial Committee and tax policy principal at the law and lobbying firm Bracewell, referring to the Economist/YouGov poll showing the tax law at a 41 percent approval rating among registered voters.
“I think Democrats have oversold the narrative that this is just a handout for big banks and [stock] buybacks and Wall Street,” Donovan said, adding that small business owners might move opinion of the law into positive territory when they start seeing the benefits of the new tax breaks the overhaul created for them.
But Donovan wasn’t so sure opinion would change too much in the near future, arguing that most Americans had made up their mind.
“To some extent it was polarized from the get-go because it was a partisan exercise,” said Donovan. “I think people are pretty politically motivated in how they view it.”
Democrats point to the GOP’s struggles in running on the law during the 2018 midterm elections as a sign that they’ve already won that argument and can use this year’s tax season to run up the score.
“The best measure of how the public feels about this tax law are the people who pushed it the hardest, way back in 2017, found that conservative Republicans couldn’t run on it in 2018,” said Wyden. “I think that says it all.”
