Democrats' anti-Trump tax cut talking point just collapsed — tax refunds are up this year

The IRS has released new data about tax filing season that has put weeks of overhyped media stories to rest: Compared to last year, refunds are now up 1.3 percent on average. Many politicians were quick to jump to conclusions about how tax refund data had proven that the recent tax cut law was a bad idea, but it's turning out that the Tax Cuts and Jobs Act has been on the whole a windfall for taxpayers up and down the income ladder.

This debate was always a bit silly. The size of tax refunds is not a useful metric for evaluating tax liability — realistically, the only thing they effectively measure is how accurate the federal withholding tables and individual withholding decisions were. While it’s understandable that many perceive a significant refund as a windfall, the truth is that tax refunds are an interest-free loan the taxpayer gives the federal government, not some sort of financial bonus.

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On the other hand, when it comes to tax liability, the vast majority of American families come out ahead. The Tax Policy Center found that 90 percent of middle-class American families would receive a tax cut this year, while the Tax Foundation estimated that middle-class families would receive an average tax cut of 1.7 percent (the most significant reduction of any income level, including the wealthiest).

Democrats get ahead of the data

That didn’t stop Sen. Kamala Harris from stating that this was proof that the Tax Cuts and Jobs Act (TCJA) was a “middle-class tax hike to line the pockets of already wealthy corporations and the 1 percent.” Nor did it prevent Democrats on the House Ways and Means Committee tweeting out an article slamming the TCJA for “falling refunds” just a few hours before the IRS released its updated data showing refunds higher than last year.

Hopefully, Sen. Harris and the Ways and Means Committee Democrats knew what they were tweeting was misleading when they tweeted it, and let’s face it: Politicians sometimes say misleading things. That being said, they should have known that there was a good chance their overconfidence would come back to bite them.

Democratic presidential candidate Sen. Kamala Harris (D-CA) in Washington, D.C., in February 2019.
Democratic presidential candidate Sen. Kamala Harris (D-CA) in Washington, D.C., in February 2019.

In general, this filing season has been anything but normal. The government shutdown postponed the start of the filing season until nearly the beginning of February, and the IRS has been trying to catch up ever since. Even now, about a month since the end of the shutdown, the IRS has processed more than two million fewer returns than it had at the same time last year.

That’s by no means the fault of the IRS alone. The agency has to contend not only with the delay from the shutdown, but the first year after major tax reform legislation. Credits, rates, and deductions have been changed, and taxpayers will likely need more help than they would in an average year. That’s why, at the start of filing season, the IRS was answering less than half its phone calls with four times the wait time as last year.

It's still to early to draw conclusions

In other words, there were always warning signs that the first weeks of data wouldn’t be representative of tax refund sizes this year. The National Taxpayers Union Foundation warned as much just a week ago, but others did as well — Morgan Stanley, for instance, is predicting that refunds will be 26 percent higher this year.

And here’s the thing: We still don’t have enough data to draw conclusions! Last week, average refunds were cumulatively down 17 percent. Two weeks ago, they were down 9 percent. The average refund could go up further or back down next week, as data naturally fluctuates. These numbers won’t be clear until filing season ends.

Even then, it won’t matter nearly as much as what we already know — for the vast majority of Americans, the TCJA left them with more money in their pocket. If you want to know how tax reform affected you, you’re better off looking at the amount in taxes you paid this year than the size of your refund.

Andrew Wilford is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education at all levels of government. Follow him on Twitter @PolicyWilford.

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This article originally appeared on USA TODAY: Democrats' anti-Trump tax cut talking point just collapsed — tax refunds are up this year