Paying a lot more and getting a lot less
April 15, 2019 3:50 PM   Subscribe

Today is Tax Day in America. The IRS is intentionally starved for resources, forced to make filing taxes as complicated as possible so a predatory industry can make even higher profits, focuses its audits on poor and black people, and can't recover the billions owed by the very wealthy people who push for its gutting. But if there could be a worst of all in this dismal maelstrom, it is this: American workers effectively pay some of the highest taxes in the world but don't get much in return.

By looking at "non-tax compulsory payments" (NTCPs) like employer health insurance premiums, Matt Bruenig has found that American workers pay far more in taxes compared to European countries often derided by Americans for having prohibitively high taxes. But unlike those European countries, America does not offer universal welfare programs like free healthcare, advanced education, or family leave:
The comprehensive measure shows that a married couple with two kids that makes the average wage pays over 43 percent of their income in compulsory payments of one sort or another. Health premiums are 26.4 of the 43.2 points.

Finally, we can go back to the OECD NTCP data and compare the US to other developed countries. When we do that, we find that only the Netherlands — with its compulsory private health insurance and compulsory private pension — has a higher labor tax burden by this measure.
posted by Ouverture (62 comments total) 42 users marked this as a favorite
 
I fell into the allegedly rare category this year of someone (married, dual income, no kids) who got burned by the withholding calculation fuckup this year and ended up having to dip into savings to pony up a $2000 in unexpected taxes.

Social security and medicare better still exist when I retire or I’m leading the armed revolution.
posted by dis_integration at 3:57 PM on April 15 [20 favorites]


Unless you have to pay penalties for underwithholding, it's a 0% loan from the gov't?

I can understand people being annoyed about this though, especially since employers were encouraged to withhold less than they should so the tax cut looked bigger.
posted by ethand at 4:23 PM on April 15


Social security and medicare better still exist when I retire or I’m leading the armed revolution.

If you were to start the revolution now, maybe they would.
posted by jacquilynne at 4:27 PM on April 15 [40 favorites]


Unless you have to pay penalties for underwithholding, it's a 0% loan from the gov't?

The proportion of Americans who would look at an unexpected tax bill and say "Huh! Well, at least we didn't have to pay interest on that. I'll just pay that with several thousand dollars out of my immediately liquid savings, which will not at all force me to make unpalatable compromises in the near term!" is... small.
posted by GCU Sweet and Full of Grace at 4:34 PM on April 15 [93 favorites]


I fell into the allegedly rare category this year of someone

Anecdotally this isn't that rare this year, and even those who's tax bills went down, they got hit with an unexpected bill or a smaller refund than they would have if administration hadn't tried to jigger with the withholding tables to make it seem like everyone got a big cut.
posted by jmauro at 4:46 PM on April 15 [11 favorites]


Yeah, I know *a lot* of people who thought their taxes had gone down this year because they were getting more money in their paychecks, but it turned out that they were withholding less but their taxes hadn't changed much, and now they're not getting much of a refund or even owe a bit. And even though commentators may say that it's their fault for not being more on top of their finances, that's very small consolation when you were counting on the money and you're not going to get it.
posted by ArbitraryAndCapricious at 4:53 PM on April 15 [5 favorites]



The proportion of Americans who would look at an unexpected tax bill and say "Huh! Well, at least we didn't have to pay interest on that. I'll just pay that with several thousand dollars out of my immediately liquid savings, which will not at all force me to make unpalatable compromises in the near term!" is... small.


My annual goal is to owe $0 to $100. I have yet to achieve it (closest I got was $400) but I usually assume $1,000 and set aside that much, because, yes, I don't want to give the government a 0% loan when it could be earning me 2%+ in a savings account.

Apparently, like dis_integration, I got hit with the withholding calculation smoke and mirrors game, and ended up owing $2,200 (and of course you get to pay a penalty fee for that, too).

So I guess those who try to owe a little versus getting a fat "refund" get most dinged by this facade.

Bastards.
posted by linux at 4:57 PM on April 15


One of the things it took a lot of my fellow academics a surprising amount of time to catch was that the new tax rules were going to clobber us. Losing unreimbursed employee expenses = losing the ability to deduct conference attendance, books, research travel, equipment...
posted by thomas j wise at 4:58 PM on April 15 [26 favorites]


As the Mercatus Center noted last year, by implementing a Medicare for All system, the US could insure 30 million more people, provide dental, vision, and hearing coverage to everyone, and virtually eliminate out-of-pocket expenses, all while saving $2 trillion over the first decade of implementation.

Well we could but there are too many people getting rich off the bad system and our politicians are too weak and scared and rich to stop it (I can't interfere with someone else's wealth or else I could lose my wealth). The taxes go towards big stupid broken fighter jets and subsidies for private prisons and Amazon. I was just thinking about this on Friday paying the tax on my husband's SSDI (thankfully my taxes didn't get fucked like everyone else's). I can't believe my husband, who qualifies for SSDI via working and then getting sick, has to pay back some of the money he gets to live on, which is a hilariously tiny amount of money, to pay for fighter jets. Absolutely nothing in this country makes any sense.
posted by bleep at 5:09 PM on April 15 [15 favorites]


If our system had the stomach for actually helping people we'd be living in paradise. As it stands we can't even let people who are too sick to work have enough money to live and then they have to give some back. And that's before you even get into the sickening indignity of what people who were never well enough to work have to go through.
posted by bleep at 5:31 PM on April 15 [8 favorites]


The joy of freelance/self-employment is quarterly taxes.
posted by Ideefixe at 5:42 PM on April 15 [2 favorites]


We're borrowing money from Americans of the future so that the government can give money and benefits away to rich people.

There used to be an individual yearly IRS report on the top 400 taxpayers, here. But in 2014 the separate report seems to have been discontinued, I think?

IIRC the number of the top 400 paying an effective tax rate in the single digits just keeps going up and up until 2014, when it had already reached a half-dozen individuals. (Which wouldn't seem like much if we weren't talking about people making many millions of dollars just in taxable income.)

(A link on that page goes directly to a single spreadsheet and claims the annual October release of Individual Income Tax Return percentile data now includes a new table (Table 3) that contains all of the item content found in the top 400 data release. But the spreadsheet table at that link just says that the 2014 “Average tax rate (percentage)” for the top .001% of individual returns is ~24%, whereas I think the "effective tax rate" in the other report was a separate statistic. And in any case, Google isn't showing me any other pages on the IRS web site that link to the spreadsheet, so I'm not having any luck finding it for subsequent years.)
posted by XMLicious at 5:56 PM on April 15 [4 favorites]


On re-visiting I'm seeing that the current numbers at my first link above say single-digit-rate payers in the top 400 peaked in 2011 at 39 individuals and went down between then and 2014. Still, it's amazing that there are any at all and I'd really like to see the data for subsequent years.
posted by XMLicious at 6:04 PM on April 15


Anecdatally, I saw very little increase in my take-home pay but a massive tax bill. I knew we were going to get shafted this year, but I didn't realize just how much.

At least I am doing my part to pay the taxes that the oppressed companies like Amazon cannot. The poor babies.
posted by fifteen schnitzengruben is my limit at 6:08 PM on April 15 [9 favorites]


In the last few months I've suffered greatly due to severe depression and haven't even filled out the tax organizer my CPA sent out. We haven't filed and I'm dreading even calling them up to ask what to do. Suggestions welcome in MeMail. Please.
posted by odinsdream at 6:13 PM on April 15 [5 favorites]


We make less than 60k household income with 4 people and paid more in taxes after the "cut." I knew the cut was mostly for rich people but i didnt realize it would actually raise taxes on the middle class.
posted by likeatoaster at 6:38 PM on April 15 [2 favorites]


I fell into the allegedly rare category ...

You and the entire state of California (and probably New York).

Not that rare.
posted by GuyZero at 6:55 PM on April 15 [3 favorites]


Also let us dispel for once and all the myth that Americans pay significantly lower taxes than other countries. My effective tax rate in the us is roughly the same as it was in Canada once you take federal and state taxes into account and if you add my HMO premiums to my US taxes then the rate is definitely higher.
posted by GuyZero at 7:01 PM on April 15 [18 favorites]


In the last few months I've suffered greatly due to severe depression and haven't even filled out the tax organizer my CPA sent out. We haven't filed and I'm dreading even calling them up to ask what to do. Suggestions welcome in MeMail. Please.

I’m very much feeling the fact that there are people in similar straits re mental illness that are also in much more dire fiscal situations than I am, but same, and I wish that everyone in such a position (and many other disadvantaged positions besides), no matter their socioeconomic status, were granted some sort of dispensation in light of how psychologically hostile the US tax system is. It’s so wildly inhumane on so many axes if you can’t pay your way out of it.
posted by invitapriore at 7:11 PM on April 15 [11 favorites]


I've seen some pretty staggering tax bills this year shared by my colleagues who are two-earner techie families in California. Like, in some cases edging scary close to six figures in taxes owed. If a primary goal of the tax changes was "fuck over coastal Californians who make big salaries", they can consider that mission accomplished.

These are people who could most assuredly afford to pay more in taxes, and are mostly pretty okay with paying more. But they are well aware they were explicitly targeted by these tax changes because of where they live and how that state votes, while many others who deserve to pay even more are not.
posted by potrzebie at 7:20 PM on April 15 [8 favorites]


Reminder: anyone in the US can get a six-month extension on filing their taxes just by asking for it. Free forms are here. You do not get an automatic extension on your obligation to pay your taxes, so if you owe money, there may be a penalty. If you file the extension, the penalty for failing to pay is half-a-percent per month. (If you don't file the extension, it's a lot more than that: 5% per month.) So if you owe $1000 and you pay it this month, your penalty will be $5 if you file an extension before midnight tonight. File for an extension right now, go to bed, and you can figure out the rest tomorrow.
posted by ArbitraryAndCapricious at 7:21 PM on April 15 [43 favorites]


it's really something -- how dysfunctional the current conservative power structure is in DC to fuck up a tax cut as bad as they did two years ago.

Apropos of nothing, here's the effective corporate tax rate, from 40%+ in the 1950s to under 10% now:

https://fred.stlouisfed.org/graph/?g=nDjW

Alternatively:

https://fred.stlouisfed.org/graph/?g=nDk5

blue line is 40% of corporate income, red line is actual taxes paid (both are in real 2012 dollars)
posted by Heywood Mogroot III at 7:51 PM on April 15 [5 favorites]


THANK YOU to all who voiced support to me via MeMail. I've filed for an extension, which I literally didn't know I could still do, and I did it by paying an estimated amount which automatically extended my deadline, who knew!!
posted by odinsdream at 8:15 PM on April 15 [46 favorites]


My annual goal is to owe $0 to $100. I have yet to achieve it (closest I got was $400) but I usually assume $1,000 and set aside that much, because, yes, I don't want to give the government a 0% loan when it could be earning me 2%+ in a savings account.

I can't tell if this is intended as ironic or not. So if you keep back $1000, averaged over a year, you earn $10? Is that worth sweating? You are sticking it to the man and his zero interest loan for $10?
posted by JackFlash at 8:22 PM on April 15 [7 favorites]


Also let us dispel for once and all the myth that Americans pay significantly lower taxes than other countries. My effective tax rate in the us is roughly the same as it was in Canada once you take federal and state taxes into account and if you add my HMO premiums to my US taxes then the rate is definitely higher.

Yes, let us. Turns out the "myth" is true. Here (PDF) you can see the actual amount of taxes paid as a percentage of GDP in every country of the OECD. Note that these numbers combine taxes at all levels - federal, state and local.

You can see that the US is well below the OECD average of 34%. The US is way near the bottom with 26% along with countries like Chile and Turkey. Canada and UK are at 32%. Denmark, France and Sweden are up around 45%.

So it is true that the US has among the lowest tax burdens of the developed nations.
posted by JackFlash at 8:47 PM on April 15 [4 favorites]


Yes, let us. Turns out the "myth" is true.

But it’s not just fed/state/local in the US, comparatively. GuyZero was comparing to Canada, where taxes pay for health care. So if you factor health care premiums into the equation (let alone deductibles) you end up with a much higher number.
posted by m@f at 9:10 PM on April 15 [7 favorites]


Also, dividing total tax revenues by GDP gets you the mean tax rate. The rate paid by, say, the median taxpayer can be quite different, depending on how progressive or regressive a country's tax structure is.
posted by mbrubeck at 9:16 PM on April 15 [4 favorites]


So it is true that the US has among the lowest tax burdens of the developed nations.


I would really recommend reading the article where they demonstrate why the OECD number by itself is not enough.
posted by Ouverture at 9:44 PM on April 15 [13 favorites]


Here (PDF) you can see the actual amount of taxes paid as a percentage of GDP in every country of the OECD.

So this includes stuff like companies making billions and paying peanuts through creative tax accounting, right?
posted by each day we work at 10:08 PM on April 15


I posted this in the megathread but I'll post here too:

60 Profitable Fortune 500 Companies Avoided All Federal Income Taxes in 2018
According to analysis from the Institute on Taxation and Economic Policy (ITEP), 60 Fortune 500 companies avoided paying all federal income tax in 2018 (with their total average effective tax rate being roughly -5%).

That’s more than three times the number of companies that avoided paying corporate taxes on average from 2008 to 2015. During that period, 18 companies managed to pay 0% or less (with their total average effective tax rate over 8 years being roughly -4%).
Wow, NO taxes for the biggest most profitable companies on the planet.

Plus, wages in the U.S. have remained stagnant since the 70's. Meanwhile, the country's wealth has exploded. It's all gone to the rich.
posted by xammerboy at 10:15 PM on April 15 [16 favorites]


I would really recommend reading the article where they demonstrate why the OECD number by itself is not enough.

By "they" I assume you mean Jacobin and their nutbar position that something that is not a tax, health insurance in the US, is actually a tax.

The distinguishing feature of the US from the rest of the world is that the majority of the health system is not supported by taxes. If you arbitrarily want to select health insurance and call it a tax, why not rent or groceries? Jacobin calls them "compulsory payments" but they aren't compulsory at all. They vary widely from employer to employer, as negotiated, and some employees get none at all. Others purchase their own insurance on the private market because they don't have an employer.

A tax is revenue collected by the government and spent by the government. I don't see how US privately purchased health insurance fits in. That's exactly the point. The US doesn't use taxes to fund universal health insurance outside of Medicare and Medicaid.
posted by JackFlash at 10:18 PM on April 15 [3 favorites]


Alternatively:

https://fred.stlouisfed.org/graph/?g=nDk5

blue line is 40% of corporate income, red line is actual taxes paid (both are in real 2012 dollars)

This is a really great illustration of corporate taxation (or non-taxation, really) with just two lines.
posted by XMLicious at 10:39 PM on April 15


Other countries also sometimes provide free higher education out of taxes, in addition to health care.

Anyway I think the honorable thing is for JackFlash to treat the cost of those items as a targeted tax rebate and calculate the effective tax rate after free college education and health care, or to include cost of higher ed and health insurance in comparing tax rates.

Otherwise you are comparing apples to oranges.
posted by gryftir at 12:08 AM on April 16 [3 favorites]


Apart from very unusual circumstances, Americans also don't need to have members of their households queue up to buy extortionately priced drinking water every day, as far as compulsory costs go. But I don't think that countries which have given away water rights to basically criminal companies should be evaluated as devoting a larger part of their economies to public or government expenditures.

Why do all of these conceptual backflips to erase the distinction between taxes and living expenses? People can hold two separate concepts in their heads; there's no need to pretend we're talking about nation-sized fruit in order to whittle a whole whopping two concepts down to a single one. People already understand the concept of different cost of living in different locations.

It's especially not worth the cost of muddying the waters to make it seem like corporations and wealthy individuals are paying much higher taxes than they actually are, and that the country is devoting a much larger fraction of its economy to the welfare of its citizens than it actually is. Note that in the first Jacobin chart it's indicated that the employer premium by itself, not including actual payroll taxes, counts as the employer paying more taxes than the entirety of the employee's tax contributions and health insurance premiums combined.

And all of the charts need to pretend every worker has two dependent children to make things look the way the author wants. This is a needless conflation that does not convey any additional information. Let's leave healthcare in the U.S. as what it actually is, a stupidly inefficient high expense and a societal debacle.
posted by XMLicious at 1:01 AM on April 16


Except that people are terrible at holding two separate concepts in their heads, and it is useful to look at things in different ways. For evidence of this, see the massive percentage of Americans who, when asked about single payer healthcare, say that it would make taxes too high, even though there is massive evidence that total expenditure would be lower. It is worth pointing out that if you count healthcare and student loans, two things which many of the "high tax" European countries provide, the total cost to the average citizen is actually quite a bit lower than in the US. I don't see how this makes it seem like wealthy individuals are paying more than they do. In fact, quite the opposite, because these expenses are highly regressive.
posted by Nothing at 2:13 AM on April 16 [6 favorites]


Your evidence that people can't separately hold taxes and expenses in their heads is that they've been erroneously persuaded that resultant taxes from an expanded medical system, covering more people, would be unaffordably high, but you really don't see how saying "actually taxes are much higher than has previously been portrayed!" would just play into all the same erroneous reasoning that society simply cannot afford [expenditure x]?

If they don't understand the advantages, they're already ignoring any comparison with how medical systems work elsewhere. All they'll hear is that taxes are super high.

They aren't, as the OECD numbers show; when a small group of people have all the money, there's no way for regressive taxes or regressive expenses to translate into a large fraction of the economy going to taxes. You've gotta have your Mitt Romneys paying their 13% and your Trumps and Fortune 500s paying their sub-0%, with everyone else paying much more than the economy-wide average, to hit the OECD 26% of the economy going to taxes that JackFlash mentions.
posted by XMLicious at 2:55 AM on April 16


The people at Trump rallies complaining about taxes probably don't even know what they paid in federal tax last year. I'm not sure reasoning with them is going to move this mountain.
posted by Brocktoon at 3:11 AM on April 16 [1 favorite]


It's a tangent, but I'd just like to come in here and state how much absolute bullshit it is that the US is one of only two countries on the face of the earth (the other is Eritrea) that makes its citizens still pay taxes even if they move out of the country.

I haven't lived in the US for almost twelve years. I haven't earned any money in the US in almost twelve years. Yet I still have to file a return every single year. Oh, and I can't use any of the simple forms or free filing services, oh no...because my income is from a foreign source. There's an entire additional form on top of the 1040. And it's all so pointless--there's an exemption threshold below which your foreign income doesn't get taxed at all, and I've never ever hit it.

All of which combines to mean that once again, I gave a company (Intuit this time) around $50-$60 that I could have used for other things to tell the US government that no, I don't owe them any money this year either...just like the last decade-plus of doing this useless exercise.

I went with TurboTax after H&R Block's online filing system claimed I owed almost $1400 somehow. No explanation was given for that figure, and their support is pretty much unreachable.
posted by Mr. Bad Example at 3:12 AM on April 16 [13 favorites]


I fell into the allegedly rare category this year of someone (married, dual income, no kids) who got burned by the withholding calculation fuckup this year and ended up having to dip into savings to pony up a $2000 in unexpected taxe

We fall into this same category, with the added wrinkle that we were also living in a blue state targeted by Republicans through capping the SALT deduction. We lost the minuscule benefit in rate decrease and paid slightly MORE overall, on top of screwing up our withholding. Thanks Republicans!
posted by T.D. Strange at 3:19 AM on April 16 [2 favorites]


The only reason I didn't get burned is that I didn't change my withholdings when I had a baby. I owed some back taxes and was hoping the extra tax burden would help with the back amount owed (I'm on a payment plan and and making that payment, and regardless it will be paid soon but I was sorta hoping it would be sooner). Under the old system I would have gotten a refund after I paid off what I owed. This year I still owed a couple hundred.

If I had changed my witholdings I would have owed thousands.
posted by AlexiaSky at 3:27 AM on April 16


We owed thousands. By contrast, the state is giving us a refund of more than a thousand. I get the impression that the vast majority of people paid much more in Federal taxes, or got a much smaller refund than last year. I hope the Democrats can remind them of that during the elections.
posted by Kirth Gerson at 4:34 AM on April 16 [2 favorites]


Jacobin calls them "compulsory payments" but they aren't compulsory at all.

Almost all adult Americans are in fact legally required to have health insurance. While there is no longer an express penalty for violating this law, the law remains.
posted by GCU Sweet and Full of Grace at 4:49 AM on April 16 [6 favorites]


I don't think non-US folks can even fathom how unreasonable filling out taxes here is. When I lived in the UK they just sent me a check when I over paid and I didn't have to do anything! It was awesome. Here (US) it is absolutely criminal that we basically have to pay someone to figure out anything above 'has W2 income'. Obviously that is a feature, not a bug. So frustrating.
Editing to add that it is especially burdensome for entrepreneur- and with lack of universal healthcare - even more-so. Health Care tied to employment BLOWS!
posted by PistachioRoux at 4:52 AM on April 16 [8 favorites]


I'd just like to come in here and state how much absolute bullshit it is that the US is one of only two countries on the face of the earth (the other is Eritrea) that makes its citizens still pay taxes even if they move out of the country.

This is why the Waltonses and Bezos and so on don't pretend to live in Bermuda or the Caymans or whatever. It's a glorious thing and everywhere should deny their rich assholes the ability to dodge taxes in this way.

It's legitimately unfortunate that the IRS doesn't work with foreign tax services to simply collect the required information from them, or offer blanket exemptions to people earning under limit-and-type in countries with higher formal tax schedules than the US, but it's what you should expect from an IRS so resource-starved.
posted by GCU Sweet and Full of Grace at 4:56 AM on April 16 [7 favorites]


Health Care tied to employment BLOWS!

I like to imagine proposing that people should also get car insurance and homeowner's insurance through their employer. Lose your job? You can keep your car insured until you get a new job, for only $1400/month!
posted by thelonius at 5:00 AM on April 16 [11 favorites]


Mr. Bad Example I am in the same boat as you with the gone for over a decade, file but don't have to pay. I do not mind the tax forms, it takes me an hour or so. I don't know that I'll ever make enough to have to pay. So I send them by mail, lol, hope you have fun with those.

[But the FBAR makes me want to DIE.]
posted by wellred at 5:48 AM on April 16 [1 favorite]


I don’t think stoking resentment over taxes is a good strategy for those of us who want to use taxes to pay for things that will make life better for all of us, like universal health care, free preK, UBI, and other such projects. You’re making the gamble that non-political junkies will go, “Oh, the tax game is rigged and we just have to make it more progressive and fair!” and not, after hearing anti-tax propaganda all their lives, just go, “Yep, taxes bad.”
posted by pelvicsorcery at 6:00 AM on April 16 [5 favorites]


It's a tangent, but I'd just like to come in here and state how much absolute bullshit it is that the US is one of only two countries on the face of the earth (the other is Eritrea) that makes its citizens still pay taxes even if they move out of the country.

I haven't lived in the US for almost twelve years. I haven't earned any money in the US in almost twelve years. Yet I still have to file a return every single year. Oh, and I can't use any of the simple forms or free filing services, oh no...because my income is from a foreign source. There's an entire additional form on top of the 1040. And it's all so pointless--there's an exemption threshold below which your foreign income doesn't get taxed at all, and I've never ever hit it.

All of which combines to mean that once again, I gave a company (Intuit this time) around $50-$60 that I could have used for other things to tell the US government that no, I don't owe them any money this year either...just like the last decade-plus of doing this useless exercise.

I went with TurboTax after H&R Block's online filing system claimed I owed almost $1400 somehow. No explanation was given for that figure, and their support is pretty much unreachable.


The problem isn't that the US has global taxation, its that everywhere else doesn't. Global Taxation is why you don't see American individuals abusing offshore tax havens the way you see wealthy folks from literally anywhere else in the world.
posted by JPD at 6:58 AM on April 16 [6 favorites]


My average and marginal income tax rates in NYC are materially higher than they would be if i lived in London - where I would get private healthcare for a very nominal cost relative to what my healthcare costs me here. The implicit property tax component of my rent is also much higher.
posted by JPD at 7:14 AM on April 16 [1 favorite]


It's a tangent, but I'd just like to come in here and state how much absolute bullshit it is that the US is one of only two countries on the face of the earth (the other is Eritrea) that makes its citizens still pay taxes even if they move out of the country.

Because a US passport is a very valuable thing and a US citizenship is a very valuable thing. If you want those then you have to at least contribute to the society's benefits that you enjoy just like everyone else who pays US taxes. If you don't think they are valuable, you could give up your US citizenship.

It most certainly is not a second tax. First off, your first $100,000 of foreign earned income is entirely tax free. And any amount above that is only taxed by the amount your local taxes are less than US taxes. Given that the US has nearly the lowest income taxes in the world, most people end up not paying any US income tax because they pay more locally.

Yes, you might have to pay $60 a year for paperwork to file your taxes but that's a pretty cheap price for a US passport.
posted by JackFlash at 7:17 AM on April 16 [6 favorites]


Yeah, I know *a lot* of people who thought their taxes had gone down this year because they were getting more money in their paychecks, but it turned out that they were withholding less but their taxes hadn't changed much, and now they're not getting much of a refund or even owe a bit.

As someone living in a coastal/blue state, pretty much everyone I know got screwed by the tax "cuts" this year. The shenanigans around withholdings is just icing on the shit cake.
posted by Dip Flash at 7:22 AM on April 16 [2 favorites]


I mean the data shows most people got a tax cut even with the SALT phasing out. only 5% of folks paid higher taxes.
It doesn't feel that way because ordinarily people who itemized deductions were over withheld, and many fewer itemized deductions, so they were less over withheld. You basically got an incremental 12k on the standard deduction plus lower marignal rates by about 3%. Even if you lived in a blue state with high SALT, you probably did ok. Even high earners were helped out by moving the AMT brackets higher.

A year ago I built a spread sheet I can't find, but by my math you had to be an extremely high w-2 (like 2 mil +) earner in NYS paying a lot in property taxes to not be better off.

(Goes without saying I don't necessarily think lower taxes are good, just responding to the angst around current taxes)
posted by JPD at 7:42 AM on April 16


I think that a lot of what's at stake here is that "over withholding" can be a smart saving strategy if you're living paycheck to paycheck. It's really hard to save money in those circumstances, and you're not going to get much (if any) interest on your savings anyway, so it doesn't matter that the government is hanging on to it and not giving you any interest. "Over withholding" forces you to save, and then you get a windfall in February that you can use intentionally. That doesn't make any sense at all to people who have more money, because they can invest their extra money in places that get interest, and they can't understand the temptation to spend, rather than save, the couple of extra dollars a week when things are really tight. There's a pretty big disconnect between the people who comment in the media on tax policy (not to mention the people who make tax policy) and many of the people who are most affected by changes in their taxes. A lot of media people think it's stupid that people are upset that they're not getting a refund. They're better off: they got that money sooner, and it's their stupid fault that they didn't save it. And that's true on paper, but people don't live their lives on paper.
posted by ArbitraryAndCapricious at 7:58 AM on April 16 [17 favorites]


I appreciate that, but that doesn't make it not wrong. If people have a cashflow issue then you should file and ask for a payment plan, while correcting your withholding for this year. Don't forget your withholding went down in '18 over '17.

Also if you make enough money that you were impacted by the Salt phase out (which is really quite a bit of money if you do the math) you probably aren't living paycheck to paycheck. And the Salt hit is really how people screwed up their withholding.

I mean we should as anti-trump folks revel in the fact that that they managed to screw up a very easy behavioral thing so that they don't get credit for the tax cut.
posted by JPD at 8:09 AM on April 16 [1 favorite]


We fall into this same category, with the added wrinkle that we were also living in a blue state targeted by Republicans through capping the SALT deduction.

New York is at least fighting back. New York has two new laws they enacted last year to mitigate the Republican attack on blue states.

The first is to allow New York taxpayers to pay to a state charity for health and education and in exchange receive a credit on state taxes. Since donations to charity are not limited in the new Republican law, this transforms a limited SALT deduction into an unlimited charity deduction. This gambit is likely to be invalidated by the IRS because current rules require a taxpayer to reduce the amount of a charity deduction by the amount that the donation provides a benefit to the taxpayer. This is the rule that Trump violated when he tried to pay his business fees with his charity. So it probably won't fly.

But New York has enacted a second new law, the Employer Compensation Expense Tax (ECET) that will work. This is a voluntary program that requires the cooperation of your employer. It works sort of like the FSA health savings accounts you may have used.

The way it works is that your employer can collect up to a 5% ECET payroll tax on your wages. Your paycheck is reduced by 5% but you then get a credit on your state income taxes for that amount. Since it is a payroll tax, it doesn't appear on your W-2 filed with the IRS. It is the same as if you took a SALT deduction on your federal taxes.

Effectively, what New York is doing is having your employer pay your state income tax for you. Since a payroll tax is an unlimited deduction for an employer, they get an unlimited SALT deduction. The employee pays lower federal tax because their wages are reduced by the amount of the ECET, the same as if they took a SALT deduction.

This scheme seems perfectly legal under current law and I think the IRS will have a harder time disqualifying it. Yes, it is just semantic reclassification of taxes, but that is what the entire US tax code is built around for rich people. It's time Democrats fight fire with fire.
posted by JackFlash at 8:11 AM on April 16 [1 favorite]


Jacobin calls them "compulsory payments" but they aren't compulsory at all. They vary widely from employer to employer, as negotiated, and some employees get none at all. Others purchase their own insurance on the private market because they don't have an employer.

The entire point of the Obamacare individual mandate is that it is in fact compulsory to have health insurance in the USA. The fact that different people pay different amounts to insurers is irrelevant to whether or not a payment is compulsory; for example, the huge variation in property taxes from municipality to municipality doesn't make paying them optional.
posted by en forme de poire at 8:14 AM on April 16 [5 favorites]


I appreciate that, but that doesn't make it not wrong. If people have a cashflow issue then you should file and ask for a payment plan, while correcting your withholding for this year. Don't forget your withholding went down in '18 over '17.

Please understand just how much information you are assuming people have and have access to. (I assume I'm more attuned to the American tax code than most, since I have a small business and that means I spend multiple weeks out of every year on filing taxes, and I don't even know about what you're mentioning.)
posted by ragtag at 8:19 AM on April 16 [9 favorites]


Add me to the list of folks with a $2000 federal tax bill. I wasn't going to get a home mortgage deduction this year anyways, even under the old rules. But the withholding rules for 2018 were just crap. I have adjusted my withholding so that 2019 might come out a bit closer. But why do I have to be the one to figure this out? This is why we have withholding, so that individuals don't have to forecast it themselves.
posted by elizilla at 10:06 AM on April 16 [2 favorites]


We are some of the *supposedly* few, who got hit with a much bigger tax bill, and overall paid more in taxes on comparable income from last year. I do our taxes via electronic forms, not a program, so I can trace how the deductions/income affects the total bill, and directly compare it to last years form. We have a 3x larger tax bill this year, which I've broken down to 3 reasons (only one is really our fault):

1/3 Screwed over by SALT and the lack of exemptions- our itemized deductions were still over the increased standard.
1/3 Screwed over by the changes in withholding- we didn't change our numbers, but the reduction assumed we'd get a tax cut (we didn't!). The pain would have been much less if the changes hadn't gone through.
1/3 Realized capital gains (not Trump's fault), which are just going straight back to pay off the tax bill. This was unique to the past year, but doesn't account for all of the increase in our bill and total taxes paid.

One of the things I realized is that the method of tax "cut" was implemented with bad PR so that tax payers got more and more pissed as they go through the forms. The increased taxable income number was supposed to be offset by the lowering of the tax brackets, but you don't see that kick in until literally the last lines of the form. Meanwhile, you're seething because of reduced deductions, no exemptions, and reduced withholding, so by the time you get to the "owe/refund" line, you don't care if you're overall paying less, it just seems like more of your income is taxed, and the bill is higher (or refund reduced). Meanwhile, the little extra money every month was already pissed away, so it didn't seem like we were more flush during the course of the year. Maybe better for the economy than a one time check, but a supremely bad way of getting credit for a political action!

I am happy to pay taxes, and the amount we pay seems in proportion to our benefits, but single payer healthcare and a MUCH EASIER tax filing system with fewer loop holes would be an amazing way to put our money to work. I hate all of the stupid new healthcare & MSA forms that need to be filled out!

ps. I wish we just had a $2k bill. I really hope we don't pay too much of a penalty :c
posted by Hermeowne Grangepurr at 10:26 AM on April 16 [1 favorite]


Er... so what happens if you're an American expat with a U.S. passport (and until recently no annual income, and now quite modest income) that doesn't file tax returns? Asking for a wife.
posted by Shepherd at 12:10 PM on April 16


Shepherd: Nothing, if she really earns zero income. The penalty for not filing is a percentage of the amount owed, so if you earn nothing and owe nothing, there is no penalty for failure to file.

It's one of the few sane things about US tax policy.
posted by wierdo at 6:54 PM on April 16


Here is a current IRS FAQ about overseas filing. You must file if your income is larger than the standard deduction and personal exemption amount combined.
posted by starfishprime at 12:09 AM on April 17 [1 favorite]


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