As we finish the tax cycle for 2018 and the final numbers are coming out, we get a clear picture of how the economy is improving. According to the IRS, they pulled in an additional $93 billion in tax revenue compared to 2017. You might be asking yourself how this is possible if the tax cuts really helped Americans.
In fact, most Americans did receive some type of tax cut. It largely went unnoticed. After the Tax Cuts and Jobs Act was passed, the IRS asked Americans to update withholdings to accommodate the law. Very few actually did, so they were shocked when tax time came. In a lot of cases, they ended up owing where a year before they received a refund.
That doesn’t mean the tax cuts didn’t work. It means people received more money in their pay and less was taken out for taxes than the previous year. That changes things. Refunds are simply the government paying you back for taking more of your money throughout the year than they should’ve. Yet, many were angry that their refunds were smaller.
Considering also that refunds also increased this year, there’s another reason for this growth. Most of it has to do with the stellar job market that sees a record number of Americans employed. The IRS processed 1.5% more returns than it did the previous year. That’s a lot of extra dough coming into the treasury.
Adding Up the Numbers
The total amount of gross collections towards the treasury for 2018 is $1.97 trillion. That’s up from the $1.87 trillion the year before. That’s a difference of $386 billion in additional revenue thanks to the tax cuts. Something special has to be going on for the U.S. government to cut taxes and make more money.
Large businesses paid a lot less money as well. They paid $91 billion less than in 2017, which is a significant cut. It’s obvious most of that money went right back into hiring new employees and improving the business. So far, the Democrats have largely blasted the tax cuts, saying the opposite would happen, that the deficit would only grow. Apparently, they were wrong.
Democrats Angry
Still, the Dems continued to criticize the tax cuts to try and make it seem as if they weren’t helping Americans. 40 Democrats in the Senate even tried to make it seem as if people who were surprised at their tax refund situation were getting screwed by the president’s plan.
“It looks like the Trump Treasury Department spent 2018, an election year, goosing people’s paychecks by under-withholding, and it should have been obvious that the bill would come due eventually,” Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) said in a statement.
Senate Majority Leader Chuck Schumer (D-N.Y.) also hit the Trump administration over its tax policy: “Many Americans depend on their tax refund to pay bills and make ends meet – but this tax season, working families will see smaller than expected returns and surprise tax bills because the Trump administration used smoke and mirrors in a shallow attempt to exaggerate the impact of their tax law on middle class families for political reasons.
At first, refunds on average were down a staggering 17%, before slowly creeping upward and remaining relatively flat. According to the most recent statistics from the IRS, by the beginning of May, individual income tax returns on average were down 1.6% when compared to the year prior. (And as always, some states are better than others for taxpayers.)”
At least no one can now say that tax cuts don’t trickle down and help out the rest of the economy. It appears as if, at least this time, it has.
