THE PROBLEM: We were given a tax cut that was supposed to be for the middle class.
WHY YOU SHOULD CARE: Because this just made it tougher for most people to make ends meet at the end of the month (or year).
Yeah, this thing has been around a little while and we’ve had a couple of months to think about it, but honestly, who of us can say what was going on in someone’s mind when they put this thing together. Roughly 14 years in the tax biz did not prepare me for the sight of a 1040 form the size of a postcard (in truth, it is a very large postcard that looks very much like it should be used for a direct mailing scheme and say, “Your Logo Here”). If it did nothing else, it at least gave the impression that we should saving lots of money…because, hey, there’s just nothing to here to fill in and pay, right?
Appearance are sometimes deceiving, my friends. Along with this little postcard (that still takes up two pages, sadly) there are numerous schedules (6 actually) to fill in. But, wait, there’s more. Do you remember all of those wonderous things that you could deduct from your income or tax amount, well most of them have disappeared into the same void that the bottom part of the 1040 went into. A few things have gone up, mind you, like the standard deduction, but this did not seem like quite enough to make up for all the other goodies that are now in the trash heap.
My plan for getting a handle on whether this is good or bad is to fill out the 1040 from 2017 and the 1040 for the same family and see what the difference would be. Will they suffer from not being able to take the personal exemption or will everything come out okay with increased standard deduction? It seemed likely, but it is a bit hard to tell when, apparently, your 1040 form for 2018 was put together by extracting the readable bits of tax code from the hind end of a lactose intolerant baboon after he was fed a trenta sized Cap’n Crunch Milkshake**.
This is what 2017 would have looked like:
2017 1040 page 1
2017 1040 page 2
This is what 2018 looked like for the same family with the same information:
2018 1040 page 1
2018 1040 page 2
Conclusion: I’m not seeing where this tax cut is actually a benefit. The tax for this family went up and the refund went down. I think this lack of benefit would have been more obvious if I had this family taking any of adjustments or deductions that were taken away, but I tried to avoid doing that to keep it simple and relatively unbiased. Having said that, they still didn’t do so well for 2018.
Some of the major points
- Although they had an enormous refund for 2017 that was largely due to the lowering of what was withheld in 2018. ***
- No personal exemption.
- No moving expenses (except for military).
- No more deducting of alimony payments, union dues or home office.
- But, get this, the Estate Tax exemption doubles. Don’t bother taking a cup of coffee over to your new neighbor with the extra huge McMansion to commiserate, because this little gift to the upper 1% will only apply to estates over $11.4 million.
**This is a real thing. If you have tasted this tender morsel, please leave me a comment to let me know how you survived it what you thought of it.
***You can look this kind of thing up in Pub 15 (also known as Circular E)