Smaller Income Tax Refunds Bring Anger, Confusion Over Trump Tax Overhaul Tax refunds so far have been smaller than last year's. Some taxpayers kept a bigger share of their income, but for others it reflects an overhaul that rewarded high earners the most.
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Anger, Confusion Over Dwindling Refunds. Is Trump's Tax Plan To Blame?

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Anger, Confusion Over Dwindling Refunds. Is Trump's Tax Plan To Blame?

Anger, Confusion Over Dwindling Refunds. Is Trump's Tax Plan To Blame?

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  • <iframe src="https://www.npr.org/player/embed/693976808/695054876" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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STEVE INSKEEP, HOST:

What is really happening with our taxes? The IRS says the average tax refund so far this year has been 8 percent smaller than last year. And that is prompting outrage since President Trump's signature achievement was supposed to be a big tax cut. Well, it turns out your taxes may well be lower than they were in the past. NPR's Daniella Cheslow reports your taxes just don't seem lower right now because of the way the administration gave you the break.

DANIELLA CHESLOW, BYLINE: In 2017, President Trump promised that his tax overhaul would benefit most Americans, and they would see the effects right away.

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PRESIDENT DONALD TRUMP: Come February, when they open their checks, and they say, wow, what happened? - I have a lot more money in here - I think that's really going to be something very special.

CHESLOW: That did happen. People saw more money in their checks last year. That's because the government reduced the amount of taxes taken out of each paycheck - also known as withholding. But now something else has happened. As tax refunds are starting to come back from the IRS, they're smaller - on average $170 smaller. And fewer people are getting them. That is causing pain. Taxpayers have been airing their grievances on social media with #GOPtaxscam and #GOPtaxscamstories. Richard Thaler, a Nobel Prize-winning behavioral economist, says the Trump administration changed the withholding on purpose.

RICHARD THALER: I can only assume that it was done in an effort to show people money as soon as possible. And the misjudgment, I think, was in thinking that people would notice such a small difference.

CHESLOW: Paycheck by paycheck, Thaler says, people don't notice an increase of $10 or $30. But when they don't get a hefty refund they're expecting and maybe even planning around, it's a big deal.

THALER: For many people, the day they get their tax refund is the one day of the year that they're actually financially solvent.

CHESLOW: Nicole Kaeding, director of federal projects at the Tax Foundation think tank, says 80 percent of filers got a tax cut from the overhaul.

NICOLE KAEDING: Don't judge your taxes by your refund. That's only one part of the conversation.

CHESLOW: At the same time, Kaeding says, 5 percent of filers saw their taxes go up. Most of those people are high earners who live in states with steep state and local taxes. However, some increase taxes have hit people of limited means, like Victoria Pearl Wright and her husband in Houston, Texas.

VICTORIA PEARL WRIGHT: When I did my taxes and saw that we weren't getting a refund, I was so emotionally floored. I had nothing but, like, shock go through my body.

CHESLOW: Last year, they got a refund of more than $5,000. Wright is nine months pregnant. She had planned to use their refund this year to cover expenses while she takes unpaid maternity leave from her job at a cafe. She thinks their taxes spiraled because they couldn't deduct business expenses, and they earn slightly too much to get a tax credit for low-income earners. Now, she's asked friends to donate to a maternity fund she set up on PayPal.

KAEDING: My husband's probably going to have to, like, pick up Lyft additionally. We don't really know what we're going to do.

CHESLOW: Tax experts say if you think your tax bill will be more than you can pay, you should still file your return on time. Pay what you can and see if you can arrange an installment plan with the IRS. And Thaler, the economist, has some advice for the government.

THALER: If they had asked my opinion, I would have told them don't touch the withholding tables.

CHESLOW: Rather, give people the same tax refunds they're used to getting year after year. Daniella Cheslow, NPR News, Washington.

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