Remember just before the end of 2017 when Donald Trump signed into law the Republican “Tax Cuts and Jobs Act?”
Trump claimed he and lawmakers “reached an agreement on tax legislation that will deliver more jobs, higher wages and massive tax relief for American families and for American companies.”
Now that tax-filing season has come and gone, millions discovered that claim, like the Trump presidency, was a scam.
Some who have seen substantial refunds in the past found themselves owing the Internal Revenue Service (IRS).
Reuters reports the 2018 tax season began slowly, demonstrating a significant decline in refunds and returns.
The IRS received 16.04 million returns in the last week of January, a 12.4 percent decline from the same week last year.
13.1 million returns declined 25.8 percent.
A demographic that found itself particularly trumped is students.
Thanks to an inconspicuous provision in the tax law, nearly 1.4 million low-income and middle-class college students and their families, and 15,000 graduate students, are now being taxed like trust-fund children, owing more on scholarship funds specifically intended for expenses like room and board.
Also impacted are college athletes on full scholarships, some “Gold Star” families receiving survivor benefits, and Native Americans.
Since 1986, scholarship funds not considered direct educational expenses, such as tuition and books, have been taxed under the “kiddie tax” that required children to pay taxes on earned income from salaries gleaned from summer jobs and unearned income from stock dividends and non-tuition scholarships.
President George W. Bush revisited it in a 2003 tax package.
In 2017, when the Ways and Means Committee approved the tax-cut bill, the Republicans that then controlled both houses of Congress included a report stating the tax bill “simplifies the ‘kiddie tax’ by effectively applying the rates applicable to trusts.”
Before, a student hailing from a household claiming a joint income of $50,000 awarded a scholarship that covered $11,500 in room and board would be taxed at his or her parents’ 12 percent tax rate.
Now, that money is taxed up to 35 percent.
Megan McClean Coval, vice president for policy and federal relations with the National Association of Student Financial Aid Administrators, commented:
“It’s one of those things that is under the radar now but could really have a big impact.”
After seeing their taxes increase, many voters who bought the lie Trump was their working-man savior are regretting their support.
Even though Trump crows about how well the economy is doing, how low unemployment is, and that the stock market is soaring–thanks to President Obama–millions acknowledge they are not seeing the gains.
At a town hall event in Pennsylvania last week, the crowd laughed when MSNBC’s Hardball host Chris Matthews asked about the Trump/GOP tax scam.
A May 7 ABC News/Washington Post survey states more than 80% of Democrats and 66% of Independents claim “The economic system in this country [mainly works] to benefit those in power.”
Nearly a third of Republicans agree.
Adjusted for inflation, recent wage increases are smaller than those seen in 2015, due in large part to workers having lost so much bargaining power.
According to Bloomberg, instead of the higher wages the GOP guaranteed, actual average hourly compensation fell in the first quarter after the tax law was passed.
An indication of how effective the tax breaks are is how much businesses are spending, because, of course, when corporations have more money, so do their workers. (At least that’s the way it’s supposed to work.)
But that is not the case.
Instead, stock buybacks appear to be soaring. Since the tax cuts passed, businesses have been using their additional capital to pay off shareholders–not employees–to the tune of more than $700 billion in the first two quarters.
AT&T, for example, promised to create more jobs after the tax cut.
It laid off 23,000 employees instead.
What this means is investors can increase consumption; i.e., more resources transfer to the wealthy, who can invest the money in other companies with better growth potential.
Many CEOs are actually coming right out and admitting they will not increase employee pay.
Axios reports:
“The message is that Americans should stop waiting for across-the-board pay hikes coinciding with higher corporate profit; to cash in, workers will need to shift to higher-skilled jobs that command more income.”
One CEO, however, is not planning on sitting on her new wealth.
The CEO of outdoor clothing and gear manufacturer Patagonia, Rose Marcario, plans on donating all of her company’s $10 million windfall to non-profit groups working on climate change and environmental issues.
That’s laudable.
However, how are her employees doing?
Are they getting any of it?
Image credit: http://www.progressive-charlestown.com/2017/12/whats-in-it-for-you.html
