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The financial, political and psychological implications of tax reform

The deadline for filing your taxes is right around the corner, on Monday, April 15. This is the first year that fully incorporates major updates to the tax code signed into law by President Trump in 2017. Amid the changes, some taxpayers are expressing confusion and alarm at how the new rules affect them. Lisa Desjardins talks to Jim Tankersley from The New York Times.

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  • Amna Nawaz:

    Well, the deadline for filing your taxes is right around the corner, on Monday. And this year is different for many taxpayers out there. It's the first year that fully incorporates big changes to the tax code.

    All were part of a tax overhaul signed by President Trump in 2017. This winter and spring, many taxpayers have been expressing frustration or confusion about how these changes impact them.

    Lisa Desjardins has the details in tonight's Making Sense segment.

  • Lisa Desjardins:

    Something unusual is happening here. The new law did cut taxes overall for the vast majority of taxpayers, but many Americans sending off their forms right now are somewhere between disappointed and stunned to see lower refunds or even more taxes due than expected.

    Jim Tankersley covers this regularly for The New York Times, and joins me now.

    Let me jump right into this. A lot of Americans are very unhappy this week, not necessarily about their overall tax bill, but about what they're seeing on their tax form. What is going on?

  • Jim Tankersley:

    Well, what happened is, the United States completely overhauled the way that it does individual income taxes, and there's been a lot of changes, and that has absolutely affected not just the amount overall that people pay, but what was put into their paychecks every month, and how much they get back in refunds.

    And it's that calculation ,how much is withheld from your paycheck, how much are you actually seeing in your paycheck every month, and how much did you expect to get in a refund that is proving to be very tricky here.

  • Lisa Desjardins:

    My understanding is, the IRS actually changed the withholding tables. And they did it in a way so that it benefited weekly and biweekly paychecks. The money went there, instead of toward refunds, right?

  • Jim Tankersley:

    Well, yes.

    So, when you cut tax rates, which they did, and change a bunch of deductions and exemptions, which they did, you have to change tax withholding rules. You have to basically decide, look, how much is the government going to take out of your paycheck every week or two weeks in estimation of what taxes you're going to owe?

    The change they made essentially biased the system toward people getting less money in the — sorry — getting more money in their paychecks, but having less money in refunds at the end. You could go in and change it, but that was the bias of the change.

  • Lisa Desjardins:

    This all happened very quickly, too.

    And this law had other some major effects to it, changing the amount people could deduct from their mortgages, for example, their state and local property taxes. Were those things also factors in these changes in refunds we're seeing?

  • Jim Tankersley:

    Yes, a little bit. Particularly the state and local tax deduction is a thing that a lot of the people in the Washington area, in New York, in California, in high-tax states and high-tax cities have noticed that have actually raised their taxes.

    Again, it's a really small number of people in the United States who are actually seeing a tax increase right now. But it is concentrated in places where, you know, big media companies exist, and so we're hearing a lot about those folks who are upset.

  • Lisa Desjardins:

    I want to talk about how many people are affected here, but there's some conflicting information.

    The IRS is saying the average refund is about the same. However, The New York Times did a survey with SurveyMonkey. And respondents told you, about a third of them believe they are getting less of a refund this year than they did last year.

    What do we know about how many people are really seeing less than they have in the past?

  • Jim Tankersley:

    So we can't know for sure, because the IRS refund statistics are averages overall.

    We know that a little more than a million people so far have not gotten refunds at all, compared to what we would have expected from last year's numbers. But our polling suggests, like, a third of people say that they're not getting the refunds that they expected or they're paying more, they're getting less of a refund. And that doesn't appear to us to be based…

  • Lisa Desjardins:

    One million Americans is not a third of the American taxpayer base.

  • Jim Tankersley:

    Right.

    Yes, it doesn't seem to us to be based, perhaps, in the reality that people are experiencing on their tax forms. And I think, charitably, we could say people are just surprised and maybe they're misremembering from last year or misreading or there's a lot of things that can happen when you're filling out your tax forms.

    It's also possible that it's just people who don't like the tax law are telling us that they didn't get refund they wanted, in part as a sort of protest to the tax law.

  • Lisa Desjardins:

    Let's talk about the psychology here.

    Economists say refund is a bad because you're giving the government too much of your money. They're holding it for you. But, you know, I reached out to my Twitter followers. I took a risk here. I asked them about their refunds.

    And I was surprised. I got a huge response from people who really want their refunds and say this year now they're doing things like canceling vacations. They can't pay to fix their roof because they expected more of a refund.

    Where are Americans on refunds? Do they care more about refunds than they do about their weekly paycheck?

  • Jim Tankersley:

    I mean, I think it's a way of forced savings, that if you expect that you overpaid your taxes a little bit with, which, by the way, is an interest-free loan to the government, let's just be really clear, if you are overpaying your taxes.

    But you expect you are going to get it back. And you know, OK, every year I get $1,000, $2,000. Even just a couple hundred dollars back from the government is something people count on that's very meaningful in their lives. And it's a windfall.

    It's not a small amount of money in their paychecks, like they see over time, which you might not even notice. I mean, paychecks change for lots of reasons. Health care costs change . You might have gotten a little bit of a raise last year. You might not have even realized the tax cuts were helping you. But when your refund comes in low, then it feels like a shock.

  • Lisa Desjardins:

    Very quickly on the politics here, this is a point of pride for Republicans, the tax cut law.

    However, if people feel like they're not getting what they expected, what do you think the results are here for Republicans?

  • Jim Tankersley:

    I mean, our poll suggests the politics that, if you really wanted to design a politically awesome, maximized tax cut, you would just triple everybody's refund, because that is the thing that really makes people happy.

    Republicans have been disappointed that the law's numbers have not picked up since it was passed. And I think this is maybe one of the reasons why. People, it seems to us, are not noticing the tax cuts that they actually got.

  • Lisa Desjardins:

    Speaking for myself, I would take triple the refund. I also didn't have a great tax year.

  • Jim Tankersley:

    Run for president on that platform.

    (LAUGHTER)

  • Lisa Desjardins:

    I think I will stay here at "NewsHour."

  • Jim Tankersley:

    OK.

    (LAUGHTER)

  • Lisa Desjardins:

    Jim Tankersley, thank you so much.

  • Jim Tankersley:

    Thank you.

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