Smaller tax refunds not bad news for middle class

With the help of many in the media, the left continues to be laser-focused on tax refunds, claiming that any reduction seen thus far in refunds this tax season somehow means that the middle class did not receive a tax cut from the Tax Cuts and Jobs Act (TCJA).

This is part of a broader false narrative pushed by far-left Democrats that the wealthy benefited from the new legislation at the expense of American families and small businesses. Although some Americans are seeing lower tax refunds, this is only one part of story. The size of the refund means nothing without considering how much in taxes is being withheld from one’s paycheck.

Regardless of refund, tax bills are smaller

Every way you look at the numbers, the overwhelming majority of Americans have seen a net tax reduction and more money in their paychecks that outweigh any reduction in refunds. By the way, a lower tax refund is actually a positive – it means that the government has been holding less of your money interest-free over the past year.

As highlighted under the new guidelines put out by the U.S. Treasury and IRS early last year, 90 percent of wage earners have seen more money in their paychecks -- with the average family of four seeing a tax cut of almost $2,100, according to government figures.

These savings are concentrated on the middle class. Taxpayers earning between $20,000 and $50,000 are seeing net federal tax cuts of 10 percent or higher, according to the Joint Committee on Taxation, while 91 percent of taxpayers with annual income between $64,000 and $108,000 are seeing a 2018 federal tax cut averaging $1,400, according to the left-of-center Institute on Taxation and Economic Policy.

Corporate tax hikes would suppress worker benefits

The Trump tax cuts have also created a soaring economy. Wages grew by 3.2 percent in 2018 as unemployment hit a 50-year low, labor force participation has ticked higher, and business investment is up by almost 10 percent.

However, many Democrats have claimed the GOP-backed tax reform is not truly benefiting American families. House Budget Committee Chairman John Yarmuth, D-Ky., has even used this as rationale to propose dismantling key parts of the tax law, including the 21 percent corporate rate.

Raising taxes on businesses would cause real financial harm to Americans, as there are countless stories of the corporate rate reduction benefiting workers in the form of pay raises, new benefit programs and lower utility bills.

For instance, the corporate tax cuts have resulted in companies in all 50 states passing along tax savings in the form of lower rates for utility customers. For instance, Duke Energy Ohio, Inc. said it is passing along $20 million in annual savings to consumers, customers of Louisville Gas & Electric Company and Kentucky Utilities saw $180 million in savings, while San Francisco-based Pacific Gas and Electric Company passed along $450 million in savings.

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Small businesses also feeling tax relief

This positive news has not been limited to corporations. The TCJA enacted the 20 percent “small business deduction” for 30 million pass-through entities (LLCs, S-corporations, sole properties, partnerships). This has allowed small businesses to provide new benefits for their workers, too.

While you won’t hear it from Democrats, the tax cuts have not just benefited the wealthy. The law has been a huge win for American families, workers and Main Street businesses.

Alex Hendrie is director of tax policy at Americans for Tax Reform, a conservative nonprofit dedicated to lower taxes and limited government.