Taxes

Today is the deadline to file your 2017 federal tax return, the last where the old rates and brackets will apply. Social media is alive with pro-Republican pundits, Republican lawmakers, President Trump and his Trumpketeers and ordinary Americans who are proud that they didn't pay attention in math class because "they'd never use it". They're crowing about how this is the last filing under the old broken, failed system. They're bragging about how it's much simpler it is and how much more money we're all taking home.

Except it's not true.

It's simpler for married couples filing jointly who were itemizing deductions between $12,701 - $24,000. That the increase in the standard deduction, which will eliminate the advantage of itemizing anything under $24,000, but for the majority of Americans who didn't itemize before, there will be no change in complexity. As for tax cuts, many Americans will see a reduction in taxes, but many won't. How will the changes in the tax rates and brackets affect you? Do the math.

No, I'm not going to do the math for you. There are several web sites that list the old and new rates and brackets. Recalculate your 2017 taxes using the new numbers and see what you come up with. And don't get distracted by what your refund is, or will be; look at what your actual tax is and compare. But I'm going to bet that the chances of you doing that are negligible. Most people either believe the Trumpists and Republicans that it's a massive, historical tax cut or that it's nothing but a giveaway to the rich, without actually checking it for themselves.

I've done the math, and I know how it will affect me, and I can also calculate whether some of the claims that people are making about how much larger their paychecks are can be true. Spoiler alert: most are not.

The effect that the corporate tax cuts will have on ordinary taxpayers is less clear cut. We've seen reports of companies that have given out year-end bonuses to their employees. Of course we never hear about the vast majority of companies that aren't giving out bonuses. And we hear of hardly any who are increasing employee pay across the board. How tax rates influence corporate hiring and investment is a complex subject, and the anecdotal evidence of a few months into the new tax framework doesn't tell us much. What I do know is that businesses seldom do hings for their employees out of the goodness of their hearts. This is why I am highly suspicious of the companies who not only handed out bonuses, but made sure to publicly credit their decision to the tax  reduction, even though the tax impact won't really be known until this time next year. Wal-Mart is a good example. Much was made about their year-end $1000/employee bonuses, but it took a while for the news that only 20 year veterans got the full $1000 and that they were simultaneously closing hundreds of stores.

So, the moral of the story is to get out your calculator, or count on your fingers and figure it out for yourself.