Sunday, April 1, 2018

Tax cut not doing much so far for most Americans

Despite the fact that most people likely are taking home more in their paychecks in the last 2 months after the withholding tables were adjusted, as of this week, most weren't noticing.
A majority of Americans say they are not yet seeing President Trump's tax cuts reflected in their paychecks, according to a new poll.

A CNBC All-America Economic Survey finds 52 percent of working adults say they haven't seen a change.

Just 32 percent of the working adults report taking home more money due to the tax cuts, which Trump signed into law late last year.

Of those saying they are taking home more money, 38 percent say the extra pay they receive helps them a "great deal" or a "fair amount." Forty percent say the extra pay helps "some" o>r "just a little," and 22 percent report that the extra pay "does not help much at all."
Put me in that 32% that has noticed, but that's because I'm a geek who follows tax policy and I wanted to see what the effect was for me, and I don't recommend that "hobby" for most people.

And I'm also a member of what is likely a much smaller minority that started having more money held back in my paycheck soon afterwards, because too much money was being taken out of my check, and it left me and my wife susceptible to having to pay back the feds some money next year. You think people believe the Piece of Shit tax bill was a ripoff that didn't benefit them now? Wait till they have to break out the checkbook and write a surprise check to the IRS this time next year.

In addition, Americans aren't spending the extra money they are getting from those tax cuts, as evidenced by this week's income and spending report from the Bureau of Economic Analysis.
Personal income increased $67.3 billion (0.4 percent) in February according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $53.9 billion (0.4 percent) and personal consumption expenditures (PCE) increased $27.7 billion (0.2 percent).

Real DPI increased 0.2 percent in February and Real PCE increased less than 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
So no real change at all in spending so far. What's interesting is that the lower tax withholdings means that the savings rate is higher from the depths that we had at the end of 2017. The trend is still downwards compared to most of the 2010s, but you can see the bump up when the tax cuts were first taken into account in January.

Over the last few years, you can see the general trend of increased incomes and spending (the drop in 2013 for incomes is the result of the end of a 2-year tax break on Social Security taxes). But notice how that disposable income and spending gap has narrowed in the last 2 years.

Let's go back to this chart in 6 months and see if there is a noticeable increase in the green line. If not, then it shows people aren't spending the funds from those tax cuts. Obviously, 2 months is a small sample size, but if you're a Republican, you're hoping that the spending figures start rising soon. Or else there won't be any effect of these tax cuts for the overwhleming majority of us...except for a higher possibility of layoffs from companies who have no other options in order to meet their higher profit expectations due to a lower corporate tax rate.

With already-skyrocketing budget deficits likely leading to some form of austerity, economic growth is going to be reduced for the overwhelming majority of Americans. But if we're not going to see the tax cuts lead to more spending in the short term, then this Piece of Shit tax bill will be an EPIC FAIL.


  1. I think of the tax cut as a loan. My wife and I also noted that our withholding dropped by twice the amount of the tax savings we expect. I believe many two income couples,especially those that itemized in the past, will owe tax and penalty a year from now unless they change their withholding.It is also worth noting that the federal government is borrowing the entire amount of the tax cut. The national debt has risen more than $1800 per person just since the first of the year. We will have to pay this back someday or forever pay interest on it.

    1. You have summed up a lot of the cynicism of this tax cut. Walker's $100-a-child tax rebate is the same kind of stunt, where the service cuts and higher property taxes come in the next year.

      The problem is that any extra money is going to pay higher bills for insurance, housing, and just getting by. It is not going to make people more secure and have a better life. And as you mentioned, thethen,it ends up costing us in the coming months and years.

      And I think most people know it in their hearts, other than the rich and corporate slime that will be better the expense of the rest of us.