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The first problem is that a tax refund’s size has nothing to with whether or not one’s tax liability went up or down. Tax refunds are the product of overpaying the IRS, and therefore giving them an interest-free loan all year until you file your taxes and get your own money back.
That # can go up or down every year for any number of reasons—for example, the IRS lowered the amount of tax withheld from paychecks in 2018 to account for the tax cut. That means people may have gotten their tax cut in their paychecks and not as much from their usual tax refund
We know the middle class got a big tax cut from the Tax Cuts and Jobs Act. Tax rates were cut across the board — the old middle class marginal tax rates of 15 and 25 percent have been reduced to 12 and 22 percent, respectively.
The standard deduction (essentially, the 0 percent tax bracket) doubled, and now stands at $24K for married couples (half that for singles). The child tax credit doubled from $1,000 to $2k per child, and is now available in full to any married couple making less than $400k/year.
The alternative minimum tax, which used to ensnare nearly 5 million families in high-cost blue states like New York, New Jersey, and California, is all but repealed.
Put all that together, and the middle class were the big winners from the Tax Cuts and Jobs Act. According to the liberal Tax Policy Center, 90 percent of families making between $40,000 and $200,000 per year (a good working definition of “middle class”) received a tax cut.
The average tax cut from the law is more than $2,100 per year. The conservative Tax Foundation reports that these middle class families see an increase in after-tax income of 1.7 percent.
This is all confirmed by the non-partisan Joint Tax Committee, the official tax scorekeeper of the Congress. The middle-class tax cuts in the Tax Cuts and Jobs Act is not in dispute by anyone except Harris.
So why are tax refund levels down a slight amount (a little less than $200, or less than 10 percent) from last year’s tax season at this time?
One answer is definitely that people who e-file this early (which means they have nothing more than wage income and simple financial and family setups) have received the bulk of their tax cut already in the form of higher take-home pay throughout the course of last year.
Their refunds would have been gigantic had that not happened. Refunds being down slightly for these taxpayers is evidence the IRS got the tax withholding just about right.
