A handful of polls have shown that the public is generally feeling more warmly about the tax cut than three months ago. According to the New York Times, support is up to 50 percent, from 37 percent in December. A Monmouth poll showed approval surging to 44 percent from 26 percent.Well, this Hillary Clinton voter knows he got a little more money in his paycheck, but that’s because I’m a dork and post about tax policy and budget stuff quite a bit. So I was looking to see when the new withholding tables would hit, and noticed that I had higher take-home pay when it did.
Still, the vast majority of adults don’t seem to have sensed the effects of the tax cut on their personal finances. In a poll by Politico and Morning Consult, just 25 percent of registered voters said they’d noticed their take-home pay increase as a result of the legislation. Another 51 percent said they hadn’t noticed a pay bump, and another 24 percent said they didn’t know or weren’t sure…
You might assume that the reality distortion field of partisan politics is to blame here. But that almost certainly doesn’t explain the entire perception gap. Only 33 percent of self-identified Trump voters in the poll say that they’ve noticed their take-home pay go up as a result of the tax cut. That’s better than the 21 percent of Hillary Clinton voters who say the same, but probably still far below the number who are actually benefitting at least slightly.
However, that increase in my paycheck was all of $42.72, and it was direct-deposited to my bank. And that reality leads Weissman to say that’s why many haven’t noticed the tax cut.
A more likely explanation, I think, is that for a lot of people, the tax cut is just way too small to pick up on, especially if you break it down into bi-weekly chunks. The Tax Policy Center estimated that Americans in the middle 20 percent of the income distribution who received any tax cut at all could expect their IRS tab to drop by $1,090 on average. If all of that money arrived at once, it would be easy to notice. But divide it by 26, and it comes out to $41 per paycheck. That adds up to real money for many families over time, but it might not jump out from a bank statement—very few of us have the eagle-eyed financial awareness of the public school secretary in Pennsylvania who noticed her paycheck go up by $1.50 a week. It’s going to be especially tough for people to pick up on the small changes in their tax withholding if their pay has changed for other reasons. According to the Federal Reserve Bank of Atlanta, which tracks pay growth for individuals over time, the median worker saw their wages rise 3 percent over the past year. Not many people are going to sit down and try to disentangle the effect of those annual raises on their paychecks from the effect of Trump’s tax cut, because why would they?
These guys are getting more than $41 a paycheck from the tax cuts.
Not only is a 3% raise is a bigger bump for most people than a $40-a-paycheck tax cut, it’s also a lot better for our overall economic growth. Of course, those 3% raises don’t seem to be happening as much in in 2018, which is likely why GOPs continue to try to sell corporate PR BS of “one-time bonuses” as some kind of indicator that the tax cut is working (Sean Duffy is notoriously awful for this).
Ironically, those bonuses are an indicator of just what a Piece of Shit that tax bill is, because many of those one-time bonuses were given at the end of 2017 to reduce profits under higher tax rates. Now in 2018, those corporations don’t have to pay higher base salaries to their workers, so they get to hoard more profits at a lower tax rate. And some are going further, using the Piece of Shit tax plan as an excuse to lay people off, take the resulting charges, and then “restructure” to get even more profits for the future. (Kimberly-Clark is exhibit A of this, but they are hardly alone).
What also is a problem with these higher paychecks is that even at a nominal $1.50 or $42.72, that amount being taken out could still be too much. For example, when I ran information for my wife and I through the various tax calculators (here is an example), I found that we would save somewhere between $880 and $1,050 next year. Sounds good, but if I’m getting $42 back every paycheck, and my wife is getting $42 back every paycheck (likely more because she makes more money, but you get the idea), that’s around $2,000 that’s NOT being withheld.
That means we would OWE $1,000 once we got around to filing in early 2019. I recognized that, and have dialed down my allowances starting with my next paycheck, and you might want to consider the same.
Why does this happen? Because the tax “reform” means that many of us will not be writing off mortgage interest, property taxes, charitable donations, or other deductions this time next year (because the standard deduction is now more than the value of those write-offs). There also is no personal deduction, which means that the extra deductions on your W-4 for your spouse or kids may not apply. As a result, many could have to pay up more than they are used to when it comes time to file.
So even if you are one of those 25% who have noticed you're taking home a bit more money in February than January, that may not be a good thing 12 months from now. So you better make yourself aware of what you'll really gain, and find out if you need to adjust your forms or spending habits accordingly.