Post an Apocalyptic Tax Season
“That wasn’t so bad, was it?” Soothing words of a nurse administering vaccine shots when I was a kid
As many of you, I also grew up in the time of mass vaccination programs. Schools were used as the site to deliver vaccines for polio (ever wonder where “A Spoonful of Sugar” came from?), DTP, mumps, measles, and rubella, etc.
(No, that’s not me at the front of the line.)
No one I knew or ever heard of questioned the need or efficacy of vaccinations. The government said it was good for us and few families questioned whether they should get them. Fast forward decades and amazing headlines are detailing outbreaks of measles across the United States and the rest of the world. Yet, The United States was declared free of circulating measles in 2000.
What happened? Doubt in government programs, concern of impact of vaccines, and mostly concern for the safety of their children have caused some parents to avoid vaccinations. I read recently of some parents having chicken pox “parties” to expose their children to the virus. The virus can remain dormant for many years and reappear in later life as shingles. Anyone who has had Herpes zoster (shingles) will tell you what an incredibly bad idea this is.
I will not question a parents’ love of their children, but their decision flies in the face of overwhelming scientific evidence. I try to avoid controversy in my postings, but I’m willing to put my flag in the ground on this one. The answer to that same question above to anti-vaxxers is that it is bad, really bad.
Now that tax season is over, (and staying in line with the original question), it may seem to many that it wasn’t too bad, although issues may be still developing. The 2017 Tax Cuts and Jobs Act was the most sweeping tax reform since the 1986 tax reform effort. The key takeaways included:
- Lowering corporate and individual rates
- Doubling the standard deduction
- Expanding the child tax credit
- Repealing the individual health care mandate
Overall, these are positive developments for simplifying the tax code, but they fall short of tax reform advocates’ wish-list. One major concern is that in includes many temporary provisions. Without further congressional action, those changes will sunset in the future.
Lowering the corporate rate from 35% to 21% may be the single most positive change in tax law impacting our economy. Lowering corporate rates help companies to expand and invest. Unfortunately, the U.S. still leads the world in the highest average rate at 26% (when you add in states’ rates) compared to the world’s average of 23%. Pro-growth advocates would propose further cuts in the corporate rate.
Tax rates for individuals also had positive impacts. Some individuals were confused when they received less of a tax refund. The reason was that they were paying less taxes throughout the year. They just did not notice that they had more take home pay in their paychecks every cycle.
This highlights one of the most common misunderstandings of getting a tax refund. If are a typical worker paying taxes in every paycheck and getting a refund when you file, you are literally loaning your money to the government at a loss to you. I highly recommend talking to your tax filer to explore increasing the number of exemptions you claim. Stop sending free money to the government.
The standard deduction has been doubled. It has been estimated that 9 of 10 filers will use the standard deduction, easing tax preparation for many.
The Child Tax Credit has doubled to $2,000 with income limits be phased out at a much larger level.
Additional changes to mortgage interest deduction, charitable contributions, and state and local deductions are also of interest, but space limits how much detail I can go into here. As with any new major law, even the experts are learning about all the ins and outs. Your accountant should be well-versed in all these changes.
While overall, the act has made some beneficial changes to tax law, this act still has not addressed the number of special interest group provisions and “rich” state subsidies that exist today. With the reality of today’s political climate, it seems to be overall positive for U.S. taxpayers. All in all, it wasn’t too bad.