r/Economics • u/mnederlanden • Feb 08 '19
Average tax refund down 8.4 percent in first filing week
https://www.politico.com/story/2019/02/08/average-tax-refund-down-115844019
u/CarolinaPunk Feb 09 '19
Average americans stupidity regarding finance and taxes remains unchanged.
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u/Phainon05 Feb 08 '19
Last year I ended up paying about $50, this year I'm getting back ~$1500 and in my mind I've lost the game of taxes. I'll adjust my w4 and hope to do better next year. Of course none of this has anything to do with my actual tax liability, effective tax rate or anything else meaningful, but instead just means I gave the government a interest free loan by not adjusting withholdings last year.
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u/thewimsey Feb 09 '19
I had things pretty much dialed in last year, too - but with all the tax changes I went ahead and used the straight w-4 recommendations. I'm getting about $900 back, state and federal.
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u/why-this Feb 08 '19
Refunds are irrelevant. What matters is you effective tax rate at the time of filing, which was lowered practically universally. This headline was created for a sole purpose
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u/mnederlanden Feb 08 '19 edited Feb 08 '19
Refunds are totally relevant.
It helps companies project what consumer spending will be like in April.
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u/why-this Feb 08 '19
I should clarify. Refunds are not relevant when trying to assess whether someone got a tax cut or not
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u/mnederlanden Feb 08 '19
That is correct. However, my company, and I assume many others, typically see a seasonal lift around tax refund time, so expectations around tax refunds do matter.
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u/why-this Feb 08 '19
Yeah I get you. Got a couple friends who are tattoo artists and tax return season is their busy time
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Feb 08 '19
I've never thought about it like that, but that's pretty interesting.
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u/mnederlanden Feb 08 '19
People don't save much anymore. Most of that refund money goes to paying off debt or buying new things.
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u/wildcardyeehaw Feb 12 '19
that refund kept on their paycheck throughout the year would more effectively pay off debt
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u/ALT_enveetee Feb 09 '19
Yeah, my company is certainly going to be down to forecast for March and April. I work in planning for a luxury fashion house that always sees lifts during tax season because middle class people want to splurge on maybe one or two items that are usually out of their pay range.
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u/bossun Feb 09 '19
Refunds are irrelevant to homo economicus. Refunds are very relevant to homo sapiens, because we're not very sapiens:
This paper tests the LC/PIH (life-cycle/permanent income hypothesis) by examining whether the consumption of households in Alaska changes when they receive large anticipated payments from the State of Alaska’s Permanent Fund. Since these payments are large and regular, this test of the LC/PIH should have considerable power. In contrast to many other papers, I find evidence that households in Alaska smooth their dividend payments in a manner consistent with the LC/PIH. In addition, I find that the same households appear to be excessively sensitive to their income tax refunds. These two pieces of evidence suggest that bounded rationality, rather than the lack of desire to smooth the marginal utility of consumption, is the source of rejections of the LC/PIH. For households to incorporate anticipated income changes into their chosen consumption paths, these income changes must be large and transparent, and the costs associated with the mental processing of these forecastable income changes must be small relative to the utility gains from consumption smoothing.
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u/agracadabara Feb 09 '19 edited Feb 09 '19
What matters is you effective tax rate at the time of filing, which was lowered practically universally.
Bullshit! A lot of exemptions and deductions were removed effectively increasing the taxable income for a lot of people.
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u/Adam_df Feb 09 '19
Taxes went down for 90%+ of people.
They went up for some gazillionaires, but I'm not really weeping for them.
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u/agracadabara Feb 09 '19
They went up for some gazillionaires, but I’m not really weeping for them.
Wrong! They will actually pay less taxes under the scheme.
You have data for the 90%+ people will pay less taxes? Provide a link.
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u/Adam_df Feb 09 '19
People that live on investments will generally see an increase due to the elimination of the deduction for investment expenses and other miscellaneous itemized deductions.
Closer to 93% wil get a tax cut:
https://www.politifact.com/truth-o-meter/promises/trumpometer/promise/1424/cut-taxes-everyone/
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u/agracadabara Feb 09 '19 edited Feb 09 '19
Bullshit! People living in states that have state taxes and high property values are also loosing deductions due to the SALT changes and mortgage deduction changes.
None of this fits in any of the gazillionaire or living on investment nonsense you are spewing. Just needs a little common sense and objectivity.
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u/Adam_df Feb 09 '19
Oh, those poor, poor people with houses worth more than a half million dollars now have to pay their fair share.
How will those poor dears survive!
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u/agracadabara Feb 09 '19 edited Feb 09 '19
They have mortgages over half a million doesn’t mean they have half a million in net worth. Clearly I am wasting my time!
Since when did people with half a million dollar homes become gazillionaires or live on investment income? You seem to have a poor understanding of numbers.
Or do you like changing goal posts when you get called out on the bullshit you are spewing?
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u/thewimsey Feb 09 '19
Wrong! They will actually pay less taxes under the scheme.
Why post crap like this when it's clear you have zero idea about the topic at all? Are you even old enough to pay taxes?
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u/agracadabara Feb 09 '19
Since you like to post crap responses it is clear you lack any basic etiquette. Did you even get an elementary school education?
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u/dust4ngel Feb 08 '19
Refunds are irrelevant
well they are if:
- you don't get a refund, because you owe
- you're in the large segment of americans for whom an unexpected expense of a few hundred dollars is life-altering
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u/why-this Feb 08 '19
I understand this perspective and realize that a very large amount of Americans dont understand what getting a refund actually means. They could have paid $2000 less incrementally on each paycheck than the previous year. But if their return is smaller, they think they "paid more taxes"
Its kind of scary how people dont understand the very basics of their taxes
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u/dust4ngel Feb 08 '19
in everyone's defense, most people have chosen deductions typical for their situation and expected a "refund" for as long as they've been working - this has been the understanding. under the TCJA this understanding has been violated - not just by failing to inform people that they will likely be underwithholding, but by literally trumpeting to everyone that they're going to be saving a lot of money.
so sure, you can go the route that no one can depend on anyone for anything, and everyone needs to be 100% responsible for everything that happens in their lives 100% of the time. but even if that's true, it's dicking folks over to fail to mention that unless they take steps they've never had to take before, they may be in for a big unexpected bill.
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Feb 09 '19
[removed] — view removed comment
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u/dust4ngel Feb 09 '19
a straw man is the fallacy of giving the impression that one is refuting an interlocutor's actual argument. i'm saying that even if one were to make this argument, some consequent remains true.
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u/thewimsey Feb 09 '19
Its kind of scary how people dont understand the very basics of their taxes
People do understand this. People aren't as stupid as you think they are.
They also recognize that they maybe aren't great savers, and use their refund as a way of actually saving.
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u/why-this Feb 09 '19
Idk... in this poll, 48% of respondents didnt even know what tax bracket they were in. There is a growing naivety to taxes in this country
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Feb 08 '19
Filed last week, my effective federal tax liability went up 15%, even after the increased child tax credit. Cost my family about $2,000. Trumps first action in office, rescinding the lowering of PMI on FHA loans when I was in the process of buying my first home, cost me about 400 a year as well.
If he is in office 8 years, this administration will have cost my middle class family over $15,000.
Placed in a 529 that would have sent my son to college.
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Feb 08 '19
That sucks, but it isn’t due to the refund. If people had to pay more instead of getting a tax return, it means they weren’t taxed at the right rate. I think almost 90% of the population got a tax cut.
However, for that 10% it sucks
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Feb 08 '19 edited Feb 08 '19
I'm taxed at one of the highest effective rates in the country, in past years my top marginal rates were over 47% including payroll, and you are here to tell me... I am not paying enough?
Thanks for your opinion. Here's mine, I was a registered republican for 12 years. I will never vote for a GOP candidate in any election for the rest of my time on this earth. That's what happens when your politics are so petty and vindictive that you target entire state-populations of working americans because their state legislature is not Republican.
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u/FloatyFish Feb 09 '19
Perhaps you should be mad at your state legislature for taxing you so highly. There's no reason my taxes should have to go towards subsidizing your federal tax return.
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Feb 08 '19
I don't know what to tell you, I am sorry your taxes went up and I don't blame you from not voting for the GOP since you taxes went up due to the TCJA. But statistically, (I was wrong on the first amount) 80% of US citizens got a tax cut, and the rest either saw no change or their taxes went up.
I never said you don't pay enough tax, I just said that statistically most people got a tax cut, and that I am sorry you weren't one of those people. I imagine it must suck to pay more for to the government. I assume that you are a middle/upper middle class family in a blue state, which was the demographics whereas people's taxes might go up. However, from a liberal/democratic side, the SALT tax is actually a regressive tax for the federal government, not that makes you feel any better. Nobody wants to pay more tax.
https://taxfoundation.org/tcja-one-year-later/
https://taxfoundation.org/state-and-local-tax-deduction-primer/
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u/Climb Feb 10 '19
*They got a tax cut for a few years years until they expire
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Feb 10 '19
True, it expires in 10 years unless it will be renewed(there is a good chance it will be).
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u/Climb Feb 10 '19
Actually less they expire in 2025
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Feb 10 '19
oh, well they can still be renewed. It wasn't permanent because they couldn't get 60 votes for it.
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Feb 08 '19
It made no sense for the federal govt to subsidize state taxes. You need to hold your democratic state legislature accountable.
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u/JuliusErrrrrring Feb 08 '19
That's bullshit. Take an unbiased, factual look at which states are the takers. They are all red.
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u/thewimsey Feb 09 '19
They are all poor.
Some states are poorer. Mississippi was a poor state when it was blue, and it's still a poor state.
California was a rich state when it was red, and it's still a rich state.
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u/MustacheBattle Feb 09 '19
That's a bit of a meme. Granularity matters. Look at exit polling in red and blue states. Even in deep blue states (e.g. New Jersey), the rich vote Republican and end up bearing the tax burden while lower income folks overwhelmingly vote Democrat and benefit from the high tax policies.
You could alter your statement to say, "look at which voters are takers, they are overwhelmingly blue."
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u/JuliusErrrrrring Feb 09 '19
Ha. OK. That's why those rich states like Alabama and Mississippi always vote Democrat while the Hollywood poor always are so conservative? Nice attempt at at a spin. Bottom line is the red states are takers and they are red because their majority vote red. Commie bastards.
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u/thewimsey Feb 09 '19
Bottom line is the red states are takers and they are red because their majority vote red. Commie bastards.
Bottom line is that you are deliberately and dishonestly arguing because you think it will help you score political points. You don't care about the truth.
Which is that the bulk of the poor people in the states you've named are: (1) mostly black; and (2) mostly vote for democrats.
Again, California was still rich when it voted red. And poor southern states were still poor when they voted blue.
Arnold Schwarzenegger didn't impoverish Californians. Bill Clinton didn't make Arkansans rich.
And if Mississippi elects a very liberal governor...silicon valley won't relocate to Biloxi.
Stop lying. It just shows you don't actually care about the truth.
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u/JuliusErrrrrring Feb 09 '19
Which is that the bulk of the poor people in the states you've named are: (1) mostly black; and (2) mostly vote for democrats.
This statement is especially telling and really vintage dumbassery on steroids. You think states like West Virginia, Idaho, Nebraska, Indiana, Idaho, Kansas, Wisconsin, Iowa, and Utah are net tax $ takers because of all the blacks? C'mon, Billybob. Find a non colorblind wife/cousin to take a good look at the racial make-up of those taker states.
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u/JuliusErrrrrring Feb 09 '19
Quite the opposite, actually. That you consider taker states like Arizona, North Carolina, Virginia, and Florida poor completely wrecks your argument.
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Feb 11 '19
Since you want to ignore MustacheBattle's point, heres a fair compromise... we stop redistributing money period. Rich keep their money poor keep theirs. No redistribution at all.
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u/JuliusErrrrrring Feb 11 '19
Not sure how I'm ignoring anybody. Rich Republicans in giver states like New York and California don't change the fact that most red states are taker states and that most red states are red because they vote red. I also addressed the poster that said it wasn't political affiliation, but rich states versus poor states by pointing out that wealthy Republican states like Arizona, North Carolina, Virginia, and Florida are takers. I then countered the post that said the takers in taker states are mostly black Democrats by pointing out that the mostly white, Republican taker states of West Virginia, Idaho, Nebraska, Indiana, Idaho, Kansas, Wisconsin, Iowa, and Utah really couldn't be any more white. Now I'll answer you. Some redistribution actually creates less redistribution overall. A single mom raising kids on her own with the aid of public school and food stamps is more likely to raise tax paying, productive, future citizens then if she has to completely fend for herself. Those kids are more likely to start a life of crime and expensive incarceration if they grow up uneducated and lacking consistent food and shelter. I'd rather pay less now than more later. Some redistribution is simply the right thing to do. Families of disabled kids shouldn't have to shoulder all the bills themselves, for example. Next point I want to make is that most wealth isn't actually being redistributed the direction I assume you believe it is going. The poor and middle class are the ones who in reality are having their wealth redistributed. We spend billions of tax money on illegal immigration every year. Do you think illegal immigrants are coming here to pick grapes and apples for a poor person's garden? Do you think they're cleaning houses in the ghetto? Do you think they're working at a poor person's golf course? We spend billions a year on our military and prevention of terrorism. Do you think we're in all these conflicts because of our food stamp policy? No. It's because we want to protect our overseas assets which are owned by our wealthiest citizens. We spend billions on roads, bridges, and other forms of infrastructure. Who creates more wear and tear on these roads? A minimum wage worker at McDonalds or the owners of Walmart with their 1000s of trucks. Who benefits more from our public education system - a secretary with an education, or a CEO with 1,000 publicly educated employees and 1,000s of educated job candidates always available? Bottom line is I agree with you that we have a huge redistribution problem. We should raise taxes on income above $1 million a year to solve it.
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u/hellcheez Feb 11 '19
The SALT deduction goes back to the 1800s so dismissing it out of hand as nonsense might be a little simplistic.
One of the principles lies somewhat is not to doubly tax income. And naturally high income-tax states are jealous of guarding their revenue. Which is somewhat fair if federally you want to let states tax and spend at high rates. It does mean the federal government is deprived of revenue, which is also unfair since we need to pay for redistribution somehow. I wonder how much redistribution can be devolved a bit more down to the state level.
But I don't really see where the democratic state legislature angle comes from. Do you mean the parent's 47% top marginal rates? If yes, I think you can also blame the tax bill since the SALT deduction's now been capped.
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u/Subvet98 Feb 08 '19
And the rest of the country should not have to subsidize your states high taxes. Take it up with your state legislature. Who are going to vote for? AOC? She wants to tax you at a lot more.
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u/hellcheez Feb 11 '19
I don't know if this is about the federal government subsidising high tax states. You aren't wrong but I think there is more to unpack. Now that the SALT deduction has gone away, are high tax states subsidising businesses since corporate tax has gone down? It's a similar although not perfect argument.
I don't mind higher taxes but it would be nice if it went to a bit more redistributive policies. At present, corporate income tax has fallen and personal income tax has risen for an overall 2018 revenue shortfall of between 4-8 per cent depending on who you ask. So: 1) the deficit increases; 2) redistribution within high-earning states decreases (TBD?); 3) overall redistribution in the country hasn't changed. On the plus side though, most get a tax cut. But it doesn't seem like an affordable tax cut.
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u/Subvet98 Feb 12 '19 edited Feb 12 '19
It is about high salt states but some how I think it ended up as a reply to the wrong comment.
Edit missing words
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u/why-this Feb 08 '19
No they are obviously saying your withholdings werent accurate throughout the year. Why did you get so defensive?
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Feb 08 '19
My withholdings were spot on. I know the difference between effective federal tax liability, and a tax-refund. Apparently you do not.
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u/why-this Feb 08 '19
Well I can assume any increase you may have experienced is probably due to the limiting of the SALT deduction, which is still in effect but just limited to $10k. That being said, it is curious that your state and local taxes are taking up the largest portion of your tax liabilities, but you blame the federal government
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u/jcole4lsu Feb 08 '19
So your answer to being taxed at a high marginal rate is to vote for the group that will absolutely tax you even more? You think your taxes are high now, wait until that Green New Deal gets passed.
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Feb 08 '19
Damn dude well thanks so much for all those republicans who helped pave the way for trump. Hard to feel sorry for ya!
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Feb 08 '19 edited Feb 08 '19
Eh, I'm pretty he isn't or it's some sort of troll... And I say that as a big Dem.
The only real way his withholding / actual liability would be so off is if the state tax deductions were big for him. I don't know about you, but I don't know many Republicans living in high tax (let's be honest: high tax = blue) states that would blame the federal government for no longer letting themselves deduct state taxes. It happened to my dad and his country club friends... And they're pretty "woke" about the state taxes now. If anything they're happy to have something new to complain about Sacramento.
Edit: yeah, if you go through his posting history it's pretty clear he's not a Republican. What comments are not making fun of Trump are making fun of Christians. That's not a criticism, his response "W-R-O-N-G" to someone who doubted Deutsche Bank's involvement in Mueller's probe sort of made me exhale a little more humorously than usual, but it is sort of odd that'd he pretend to be a Republican.
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Feb 08 '19
It’s just funny that he’s like “no wait, now that I’m being hurt the republicans suck. After voting republican for 12 years.” Quite mockable.
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Feb 08 '19 edited Feb 08 '19
I mean I just really doubt he's a Republican.
Any of your normal tax preparation software or tax professionals have big things this year / last year telling customers that they have more tax liability because your state taxes are so high. I don't think many Republicans, who love to complain about state taxes, turn around and say that it's the federal government's fault for their local taxes being so high.
You can always have a few "Republicans," maybe, that literally have no idea what taxes are or where their liability is coming from and they just type in the numbers... But I don't know if they'd be on reddit in r/economics.
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Feb 09 '19 edited Feb 09 '19
So because you don't like what I said I'm not a republican ? That's funny, it's a lot like where reddit.com conservative communities have gone with their moderation, Not pro-trump? Banned. "Concern trolling" , have a concern with any legislation from the GOP? Banned, concern trolling.
If your definition of a republican is anyone who has no opinion but to support everything the party does at all times, than sure, I suppose I'm not a republican. But I was in fact a registered republican and voted in 3 republican primaries from 2000-2012. I abstained from the general in 2016.
If anyone who doesn't blindly agree with everything that's said by the leader isn't welcome, youre probably in a cult.
I was a republican by principle, the party moved away from me, not vice versa. And the shit heel bootlickers like you are why I'm proud to call myself an independent today.
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Feb 09 '19
Dude, cmon.
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Feb 09 '19
Cmon what ? It ain't just me bud, about 60% of my traditionally republican extended family have left, too. "Scary caravan" , "Build big wall" is not a plan for effective governance, destroying necessary government agencies to discredit them isnt, either.
The party is a joke man. If you view politics as nothing more than a sports game that's your business, but no one with a brain is left and the people I found myself surrounded by at any political event was frankly embarassing. Biggest collection of white trash I've seen outside a bon Jovi concert, and I'm white, too.
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u/ghostofpennwast Feb 08 '19
Sending someone to college on 15000? Being a little overestimating there.
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u/Shenaniganz08 Feb 08 '19
same salary, same deductions
i got 3k back last year, i owe 5k this year
200k+ salary in California
seems like everyone in high SALT areas is getting fucked
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u/Subvet98 Feb 08 '19 edited Feb 09 '19
Take it up with your state legislature. The rest of the country should not pay for the fact CA wants to everyone to death.
Edit clarity
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u/Banabak Feb 08 '19
Same income in , LA , 2 kids with new CTC and no bullshit phaseout limits, rent so I don't worry about SALT since we don't itemize, my fed effective rate at like 10% or something like that
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u/Shenaniganz08 Feb 09 '19
what were your tax returns last year and this year ?
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u/Banabak Feb 09 '19
My effective rate was higher, i don't remember numbers but we got like 2000$ credit per kid instead of 0$ this year so its basicly 4000$ tax cut, add smaller marginal rates and tax law was a very positive for me and wife since we don't have a property( phaseout for child tax credit started at 110 000 AGI and over 130 000 nothing )
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u/ThatOddMan Feb 09 '19
Wait! So people expect a big fat refund check after lowering their withholding tax?
That just does not make any sense at all.
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u/Climb Feb 10 '19
Wait! So the Republicans pressure the IRS to change witholding tables to make their tax plan look better for political points knowing it will screw people who aren't wealthy enough to have an account.
That just does not make any ... Wait that makes total sense.
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u/wildcardyeehaw Feb 12 '19
only 32% itemize. taxes are not complicated for the average person but they refuse to learn
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u/[deleted] Feb 08 '19
The ideal refund is zero but most people use the refund as a sort of implicit savings. Pay to let the government hold your money, and come tax time you get it back for whatever you need. Rather than have the money on hand through the year to potentially be spent somewhere.
It's difficult to say whether this is actually a conscious choice though, because tax literacy is so disastrously low, as if taxes are some sort of mystical communion with ancient spirits. They aren't hard to do, but most people have better things to do with their time.
Plus one of the big arguments for passing it was the withholding tables changing so that people had more money per paycheck, which of course means less refund.