New data from the IRS shows that Americans actually ended up paying approximately $93 billion more in federal taxes under Trump’s tax legislation than before it passed.
According to a new report from Yahoo! Finance, the IRS collected approximately $1.97 trillion in gross collections (before tax refunds were disbursed) in tax year 2018, compared to $1.87 trillion in gross collections for tax year 2017. However, because most American taxpayers didn’t update their withholdings following the passage of the so-called “Tax Cuts and Jobs Act” in December of 2017, millions of Americans who would have gotten a tax refund ended up getting a surprise federal tax bill instead. After refunds were disbursed, the IRS took in around $93 billion more in 2018 compared to 2017.
Following the passage of the tax law, Americans’ withholdings (money withheld from each paycheck for tax purposes) fell by more than the actual taxes they owed. This means that, if Americans didn’t manually adjust their withholdings, they ended up owing federal taxes, even though they had a negligible amount of new money in each paycheck that went largely unnoticed. An NBC/Wall Street Journal poll from April of 2019 found that just 17% of Americans felt they had gotten a tax cut, for example.
Last week, a report issued by the non-partisan Congressional Research Service (CRS) found that the Trump tax “cuts” largely failed in their stated goals of increasing economic growth or raising workers’ wages. Some of the other stated goals of the legislation included incentivizing corporations to keep their headquarters in the U.S., and to get corporations to pay workers more. However, the CRS found that the legislation — which costs about $150 billion in lost revenue each year ($1.5 trillion over 10 years) — also failed in those aspects.
“While evidence does indicate significant repurchases of shares, either from tax cuts or repatriated revenues, relatively little was directed to paying worker bonuses, which had been announced by some firms,” the paper read. “Although the legislation contained a number of provisions that discouraged inversions (shifting headquarters of U.S. firms abroad), these inversions had apparently already been significantly slowed by regulations adopted in 2014, 2015, and 2016.”
Most of the benefits of the tax cuts went to large multinational corporations, which saw their rate drop from 35% to 21%. But despite the tax cut, many of these corporations used the extra money for stock buybacks, which tend to increase the value of stock options owned by executives. At the end of 2018, corporate stock buybacks hit a new record of $1.1 trillion. Meanwhile, corporations like Union Pacific, Verizon, and even MyPillow (founded by outspoken Trump supporter Mike Lindell) are firing thousands of workers despite the tax cuts.
Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.