Diminishing Returns
The Washington Post, USA Today and New York Magazine have all ran stories this week that President Donald Trump has stumbled into political disaster as Americans are seeing an average of $170 less on their income tax returns this year. As the media-industrial complex is wringing its hands over the loss of less than the “crumbs,” Nancy Pelosi joked about as the bill was passed, more and more Americans are realizing what a scam the income tax return system is. If you are like most Americans and understand making a budget, simply watching your spending or even have a basic understanding of elementary economics, then you will be with me celebrating when we take that smaller check to the bank this year.
Left Laments About Lower Tax Returns
Many people are like, “Whoa, who wants to take less money to the bank?” because they are buying into the focus group tested headlines that are designed to raise the alarm in people before they have time to think. “The government is taking more of my money…” is the response you will hear from many people as they read these end-of-days headlines, but when people have time to think, “Why am I getting less money,” they start to wake up to what a scam the federal income tax system is (and in many cases the state income tax system is too). The truth is, if you are a working American, that a small income tax return is better for you, let me explain why.
Tax returns are just checks the government gives you for catching them having too much of your money.
Each year, the federal government takes in billions of dollars in tax revenue- most of that comes from income tax (48%). The other half of the government’s income comes from payroll taxes (35%), corporate tax (9%) and the motley crew of excise, estate and customs taxes (8%). As a result, the government took nearly $850 billion out of the pockets of American tax payers last year alone. The tax code that went into effect last year raised the income of the federal government by lowering the taxes paid by individuals and shifting that tax burden to importers, exporters and businesses in the United States. The end result was the federal government having nearly $14 Billion more in revenue for calendar year 2018. By shifting a lot of the burden to out of country actors, in the form of tariffs, this means that the Federal Government took less money off of you and your families in 2018 but still made more money!
Symptom of Poor Money Management
Now some of you are still asking why I am happy that I am getting a lower income tax return? The answer is simple, it is because of the reason that we are getting lower tax returns- because the government took less of our money in the first place. Tax returns are just checks the government gives you for catching them having too much of your money. We have been programmed as a society to think that tax returns are a gift from the Federal Government for filing our taxes on time. In all actuality, a tax return is just the government giving you your change back at the end of the year for the money you paid into our bloated federal system, kind of like getting change back at the store. And just like when you get change back at the store, you only get back the amount you paid over what you owed, so you are just getting back your money. Let’s look at an example, you buy some food at the grocery store- the total cost of your bill is $17 event. Now if you pay with a $20 bill, you get $3 back and if you pay with a $50 bill you get $33 back. Do you get more excited if you pay with the $50? Of course not, you are just getting your money back.
The reason that I am so excited about the income tax returns being smaller this year is because of the nature of the federal system. How would you feel if the grocery store in the example above kept your money till the end of the year before they gave you your change? How long would it take until those $3 returns added up to enough that you started to worry about it? $6? $21? It would not take long. However, if you are getting back $2,782 (which is the 2017 national average for family income tax returns) that means that the government is holding $53 of your families money every week until the end of the year. Worst of all they are holding it without interest! That $53 is a tank of gas, a family movie night or part of a trip to the grocery store, all money that the government is keeping from you and your family because of a broken tax system.
The reason I am happy is millions of people across the nation have kept their money and that money is not sitting in government coffers all year long. Each week, those $53 average that people took home were food for the kids, money for school savings funds and donations to charity that would have been sitting in government coffers all year under the old tax code. I am celebrating because in 2018 the government held less of my money and I had access to it all year. So while I may not be blowing a big income tax return on a vacation, a new TV or party with friends (over 25% of Americans use their tax refunds in this way), I had the wherewithal to save some of that money so I could participate in this new, record economy that is helping to reshape the face of the United States. So if you are like me, then you want the government to let you keep more of your money, not the government taking more of your money.
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