Republicans leaders have been pushing back this week against claims that smaller refunds this year mean people are paying more in taxes.
Congressional Republicans achieved one of their biggest accomplishments in recent years when they passed tax reform into law.
Democrats have adamantly opposed the law — while arguing it was really aimed at helping the wealthy.
Sen. Kamala Harris (D-Calif.), for example, recently argued that lower tax refunds indicate the law was a middle-class tax hike.
“We’re a couple weeks into a very unusual tax filing season because of the partial government shutdown,” House Ways and Means Committee Chairman Kevin Brady (R-Texas) (shown above right) said. “Refunds vary from year to year — that’s natural. And it doesn’t even reflect the refundable credits like the earned income and the child tax credit that are an important part of these.”
Democrats have long opposed the law; and the recent start of the current tax season has spawned new criticisms.
Republicans are countering the new narrative on tax refunds as nonfactual. The Washington Post Fact-Checker even called the argument “nonsensical and misleading” before giving it four Pinocchios.
“The average tax refund is down about $170 compared to last year,” said Harris, who is running for president, in a tweet on February 11.
“Let’s call the president’s tax cut what it is: a middle-class tax hike to line the pockets of already wealthy corporations and the 1 percent.”
The Tax Cuts and Jobs Act lowered rates and simplified the tax code when it was passed in December 2017. The law lowered rates for most of the seven income brackets while reducing or estimating certain tax deductions.
It doubled the standard deduction as well. It also lowered the corporate tax rate from a maximum of 35 percent to 21 percent.
“It has zero to do with your tax bill, zero to do with it. It is merely what you overpaid the IRS in your paychecks last year,” Brady said. “Our thinking was in tax reform that most families live paycheck to paycheck — it’s best to drive that into their paychecks last year, starting in February and March, rather than delaying it a year.”
The average tax refund is down about $170 compared to last year. Let’s call the President’s tax cut what it is: a middle-class tax hike to line the pockets of already wealthy corporations and the 1%.
— Kamala Harris (@KamalaHarris) February 11, 2019
Brady added that because of the law, most taxpayers will be able to use the simplest filing form ever. He also pointed to how a lot of small businesses are helped by the law outside of tax cuts by allowing for full expensing. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) (above left) and Brady echoed similar points in an opinion piece for USA Today.
“Set aside that the Treasury data is merely the first few weeks of a very unusual tax season due to the partial government shutdown,” the two lawmakers said in the article. “And ignore the important fact that refunds, which include tax credits from earned income and additional child credits, aren’t reflected in these initial reports.”
The lawmakers also noted that the economy has improved since the tax reform law was passed. They pointed to trends like the rise in blue-collar employment and median household income. President Donald Trump entered office with the promise to grow the economy by reducing taxes, deregulating and reworking trade deals.
The economy appears to be improving at a faster rate since then, with economic growth hitting above four percent, more people entering the workforce, and massive gains in the stock market. Republicans have also been able to point to the hundreds of companies that have raised wages, bonuses, and invested in new facilities since the law was passed.
“The size of your tax refund has nothing to do with your overall tax bill. It merely reflects what you overpaid the IRS in your paychecks last year,” the lawmakers also said in their piece. “For most Americans, the Tax Cuts and Jobs Act delivered larger paychecks starting last February, even if many workers didn’t notice.”
Congressional Democrats have argued the legislation helped the wealthy while doing little for others. Everyday Americans did get a tax break, but wealthier individuals and corruptions got substantially more. They also tend to pay more in taxes.
Brady played a pivotal role in getting the tax reform legislation written and passed into law. But he admits the law didn’t reach all of its goals and has since worked to build upon it with his proposed Tax Reform 2.0.
The proposal is intended to strengthen aspects of the law, such as making the individual tax cuts permanent.
Congress was unable to make the individual tax cuts permanent because of budget restrictions. Senate rules capped revenue losses on the bill to $1.5 trillion over 10 years, so lawmakers revised their bill to not go over that limit by setting the individual rates to expire by 2025.
Republicans could make the individual tax cuts permanent now, but deficit concerns remain.
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