If you or your co-workers were expecting federal tax refunds this year but ended up owing taxes instead, you aren’t alone.
Figures from the Internal Revenue Service show that for tax year 2018, Americans’ tax refunds from the federal government are down by more than $6 billion compared to tax year 2017. The IRS paid roughly $212.3 billion in tax refunds last year, but just $206.1 billion in tax refunds this year, as of March 29, 2019. While 73.3 million Americans got tax refunds last year, only 71.7 million Americans got refunds in 2019, meaning 1.6 million Americans who got refunds in 2018 now owe federal taxes this year.
As tax year 2018 was the first full year the Republican tax cut package of 2017 has been in effect, these figures paint a fuller picture for how the legislation impacts working-class Americans’ tax bills.
Typically, a tax refund is paid out for Americans working full-time W-2 jobs, in which taxes are preemptively withheld from each paycheck throughout the year. Many Americans opt to pay more in withholding taxes than they typically would owe to err on the side of paying too much rather than not paying enough. The refund comes from the sum amount of withholding taxes and estimated taxes paid, as well as any refundable tax credits.
However, as Vox noted, one of the lesser-known changes in the Tax Cuts and Jobs Act (TJCA) of 2017 was that average withholdings fell by more than actual taxes owed, meaning some Americans who expected a tax refund this year ended up owing federal taxes. This flies in the face of what both former House Speaker Paul Ryan (R-Wisconsin) and President Trump said in the lead-up to the passage of the tax bill, when they promised working-class Americans that their taxes would go down and that they would have more money as a result.
To contrast, large multinational corporations are paying much less under the TJCA. As Grit Post previously reported, online video streaming service Netflix paid a negative federal tax rate last year, despite making nearly $900 million in profit. The company actually ended up getting a $22 million federal tax rebate despite their immense profits. In fact in the eight-year period between 2008 and 2015, Netflix paid an average effective tax rate of just 13.6%.
Most Americans seem aware that they’re faring much worse than corporations following the passage of the TJCA. An August 2018 Fox News poll found that the Republican tax cut package had just 40% approval. To compare, that same Fox News poll showed the Affordable Care Act — also known as Obamacare — had 51% support.
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.