For many Americans, the Trump tax cut doesn’t feel like a boost

Why We Wrote This

President Barack Obama’s signature domestic initiative, on health care, was marred by a glitch-prone rollout. Is President Trump’s tax-cut law hitting comparable bumps now, in its first tax-filing season?

Keith Srakocic/AP
A 2018 tax form from the US Internal Revenue Service. Many Americans are writing checks to the government this filing season, either because their taxes actually went up or because the amount of money withheld from their paychecks fell more than the size of their tax cut.

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Historically, cutting voters’ taxes is often a political winner. President Trump has been fighting an uphill battle on this front though. Partly that’s because of dueling political views. But another reason is coming into play as Americans start filing their first tax returns under his 2017 law: Many people aren’t even feeling a pocketbook benefit. Refunds are often smaller, or people are being hit with a surprise payment they owe instead.

What’s going on is that people often got their tax cut throughout 2018 in the form of less money being withheld from their paychecks. But if their withholding fell too much, they now owe a payment.

Then there are taxpayers frustrated by the altered format – or ones whose taxes really have gone higher. “We’re paying more this year, even though the standard deduction is higher,” says Mary Tom Brownell, a retired educator in Colorado. Says tax adviser Tim Barry in Massachusetts: “You always have the theoretical part of the law and then it’s different when you actually have to put pen to paper."

Touting his tax cuts in West Virginia last April, President Trump promised: “This will be the last time – April – that you’re going to [fill out] that old-fashioned, big, lots of pages, complicated tax form. Because next April you’re going to, in many cases, [file] one page, one card. It’s going to be very, very different.”

Mr. Trump, meet Greg Palmer, a Seattle-based fundraiser for nonprofits who would naturally be attracted by tax simplification. He’s one of an estimated 3 percent of filers who does his taxes himself – and by hand.

“The redesign was not intuitive,” Mr. Palmer writes in an email. “Lots of jumping back and forth on each line item. A terrible idea, just to make the form ‘shorter.’ ”

But surely people with simple returns – only salary income and no deductions – will save time filling out the shorter form?

Not exactly, says Lynn Ebel, director of The Tax Institute at H&R Block. People still have to go through the same question-and-answer format to figure out if they have to fill out any of six new supplemental 1040 schedules, not to mention the standard schedules A, B. and so on.

Although their signature tax cuts were never the political home run they expected, Republicans had made progress last year narrowing the law’s popularity gap. But as the income tax-filing season gets under way this year, those gains are now threatened. In a bizarre twist, a tax reform that does save money for most Americans is earning negative reviews as the experience of filing returns doesn’t live up to the hype that was used to sell the tax package to the public.

“You always have the theoretical part of the law and then it’s different when you actually have to put pen to paper and prepare somebody’s tax return,” says Tim Barry, a partner at Blumshapiro, a tax and accounting firm based in West Hartford, Conn. “If you talk to any tax professional, they’ll tell you that this is going to be a very trying tax year.”

Even some Trump supporters are angry.

“My income is the same, but this year I went from a $1,000 refund to a $2,000 owed!” tweets an angry Bennie, who calls himself a big Trump supporter.

It’s a common objection. Last year at this time, early filers due a refund were getting an average $2,035, according to the Internal Revenue Service. This year as of Feb. 1, they were only receiving $1,865, an 8.4 percent drop.

But it stems mostly from a misperception. H&R Block had noticed the confusion as early as this past November, when its survey showed that nearly half (47 percent) of Americans expected that tax cuts would mean they would get a bigger refund, says Ms. Ebel. But that’s not how it has worked out.

Many Americans already received the bulk of their tax cut last year, when the IRS withheld less money from their paychecks. So when wage earners prepare their taxes, they may find that their tax refund is smaller because less was withheld from their paycheck.

Then there are a whole class of people for whom federal taxes really did go up because the Trump tax law created a new set of winners and losers.

“We’re paying more this year, even though the standard deduction is higher,” says Mary Tom Brownell, a retired educator in Glenwood Springs, Colo., who is married and filing jointly. The reason: Even though the standard deduction doubled, many of the exemptions she and her husband could take last year were capped or eliminated this year.

“It was a bit of a shocker,” says Fred Telschow, manager of the media group at The First Church of Christ, Scientist, in Boston. (The church also publishes the Monitor.) His wife took a large pay cut to take a new job last year. “My income went down because of Meredith’s situation. [But] because we didn’t do as many deductions, I owed more in taxes.”

If he hadn’t bought an all-electric Tesla, which earned him a $7,500 federal credit, “I'd be cutting a check” to the government, he adds.

Meanwhile, some of the biggest beneficiaries and potential cheerleaders of tax cuts haven’t been able to file their taxes yet, because of IRS delays in issuing final rules.

For example: The agency only recently released final regulations for the qualified business income deduction, and tax preparers are still waiting for final regulations on an interest expense limitation. These regulations are key for so-called “pass-through” entities – business owners who file their business earnings through their personal return – who are likely to be big beneficiaries of the tax cuts.

“There’ll be more people who will have to file extensions this year to finish their returns,” says Mr. Barry of Blumshapiro.

Thus, the early narrative of the Trump tax cuts – much like that of Obamacare, where the online signup system famously crashed – is at risk of turning more negative.

The legislation was never very popular. Shortly before Congress passed the tax cuts, 56 percent of Americans disapproved while 29 percent approved, according to polling by Gallup. By last fall, however, the tax cuts had gained more support: only 46 percent disapproved; 39 percent approved.

Of course, perceptions of the tax cuts are heavily colored by politics. The same Gallup poll last fall found that 76 percent of Republicans approved of the tax package, while only 8 percent of Democrats and 34 percent of independents approved.

“The politics of this are so tainted for the two-thirds of the country that does not support this administration,” says Jeff Howard, who saw his tax refund shrink this year and who worked for Democrats in Washington, D.C., before taking a job at an education start-up in Denver. “This is going to be a very easy leap to scapegoat [Republicans for], why those refunds are less.”

“It's just one more piece to be frustrated about” with the administration, says Ms. Brownell, the retired educator, who did not vote for Trump in 2016. “It just adds fuel to the fire.”

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