Live in a high-tax blue state? Annoyed by the SALT deduction cap of $10,000? Quit whining. You were one of the biggest winners of the Trump tax cuts.
An early analysis of data shows taxpayers in high-tax states (e.g. California, New York) were some of the biggest beneficiaries.
The majority of taxpayers received a tax cut in 2018 but it didn’t feel that way. Reasons abound but the primary drivers were agenda and timing.
On the agenda front Democrats railed against the Republican tax cuts. The SALT limitation was said to punish people living in Democratic states. Of course an analysis of the tax changes shows that, on net, aspects of the tax code that were changed and resulted in a negative impact (e.g. loss of personal exemptions, limitation on state/local taxes) were far outweighed by those resulting in positive impacts (e.g. lowering of tax rates, broadening of brackets, increased AMT exemption).
From a timing perspective taxpayers who generate the bulk of income through wages received their refund throughout the year in the form of slightly bigger paychecks. Federal income taxes withheld from employees’ paychecks were reduced unless they filed a new W-4. Most people did not. As a result many people got a smaller refund or had a larger balance due than what they expected.
Despite data showing most people received tax cuts media reports reinforced the opposite impression. A March NBC News / Wall Street Journal poll showed 17% of respondents believing they paid less in taxes under the new law compared with 28% believing they paid more. The rest did not know or thought they were paying the same.
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