Saturday, February 9, 2019

Trump Tax Hike on Middle Class

Some Trump voters are shocked and upset that the Trump Tax Cut is hurting them.

It’s February which means it’s officially everyone’s favorite time of year: tax season! And while most of us will be putting off tracking down our W-2’s until early April, some people have already managed to file their taxes. And among those early birds, many in the middle class have been shocked to find that instead of the nice little chunk of change they were expecting with their return, they actually owe money to Uncle Sam. What’s the reason for this financial switcheroo? 

It stems from President Trump’s tax reform, which was passed in 2017 and was touted by Trump and the GOP as a win for the middle class. However, with the new tax system now in place, Americans are discovering that most of the tax relief from the bill is actually being experienced by corporations. 

Meanwhile, many people are seeing an increase in taxes due to the bill eliminating many of the deductions that were used by middle-class families in order to lower the amount of taxes they were required to pay. Most notably, the tax reform placed a cap on deductions for taxes on both state and local levels.

Unsurprisingly, people have not been happy to discover that what they expected to be a decrease in taxes paid is actually an increase. Those who had been supporters of Trump are especially infuriated, as many were under the assumption that he would provide financial relief for middle-class families, something that he consistently promised during his Presidential campaign. 

Many have even taken their anger online, with #GOPTaxSCAMStories trending on Twitter as more and more members of the middle-class express their feelings of betrayal towards Trump and Republicans.

There are a number of ways to look at this. The new tax law has a $10,000 limit on deductions for state and local income taxes (SALT). This was designed to hit those durned latte sipping quiche eating Prius driving "coastal elites" in states that tend to vote Democratic in Presidential elections. The problem is though that are still some Republican voters in those states. 
More importantly there are a few such Republicans in relatively high tax regions in Middle America. They are finding out that they don't get a tax deduction for being Republican. Additionally there were plenty of warnings from the IRS, accountant and tax filing services, and employers throughout 2018 that because taxes owed had dropped so did the amount of money withheld from paychecks by employers. 

In some cases, depending on changes like (ahem) the new SALT limit, you could keep everything the same and wind up with a smaller refund than you expected or even end up owing taxes in 2019. Smart people heeded those warnings and made sure to alter their withholdng and tax payments during 2018 so that there were no big surprises in 2019. 

People who didn't pay attention didn't do those things. Now some of them are going to get burned. They evidently thought that it was only those OTHER people who were going to get the boot to the head. And they were just fine with putting the boot to THOSE people.

Well they voted for Trump and got screwed financially. Imagine my surprise. If only Trump had a track record of financially stiffing people in the lower tax brackets that would have alerted people to be wary of his promises. Too bad. So sad. Sorry. Not sorry. The data won't be in until later this year and 2020 on how widespread this phenomenon is. It could just be a few disgruntled people. It could be a lot. But it is something worth watching. My guess is that the people who got hurt by this tax cut will grin and bear it as long as they think someone else is getting it worse.
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