If you prepaid $2100.00 in taxes, Uncle Sam could refund you $9987.00

by Hecce 17 Replies latest social current

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  Hecce

  There was a little bit of discussion on another thread about the results of the recent tax changes in USA. I decided to compare whether or not the changes were favoring the lower-income class versus the middle class. The family that I inputted into the system was a married couple with four minor dependents, their income was $44000.00 annually and they paid $2100.00 in taxes during the year.

  After completing the calculations, this family is getting a refund of $9981.00; the bulk of it are Earned Income Credit $2191.00 and Additional Child Credit $5600.00. I also compared the difference between their previous year taxes and the current ones and using the same figures they are getting an additional $2503.00, or 25% more as a result of the tax changes.

  I reaffirm my conclusion that the tax law was designed to favor the lower-income people, that the middle class is the one paying the price and that President Trump is going to pay a political price for it.

  If anyone wishes to play around with figures and make comparisons, they can visit this site:

  https://www.taxslayer.com/tax-tools/tax-refund-calculator
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  Still Totally ADD

  I know my son and his wife with 3 children are getting back a little over $2100.00 for making a litlle over $50,00.00 last year. So I don't know what you are saying is the case. But I could be wrong. Still Totally ADD
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  MeanMrMustard

  I would be considered “middle class”, and I am getting back a lot of money. Also, my withholding is a bit less. My refund is partially coming from a bonus my company gave to all employees near the middle of 2018. It was widely celebrated until everyone realized that the actual amount coming to them was about half of their announced bonus amount - the federal and state bonus taxes will bleed away about 50% off the top. That sort of over-taxation shakes out at the end of the year resulting in a larger refund.

  In general, I try to shoot for a smaller refund by adjusting my withholding. It is better to get more of your money throughout the year instead of loaning it to the government.
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  Hecce

  The link that I provided will have a simulator, it is easy to follow; just reply to some very simple questions and it will give you an estimate of what your tax situation is going to be. It is a way to verify this issue.
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  truth_b_known

  The perfect tax return is $0.00.

  This is the same reason I know longer escrow property taxes and insurance through my mortgage company. Mortgage companies over estimate what you will be paying in property taxes. The money you pay into your escrow account goes into an interest bearing account. Come tax time, the mortgage company pays your property taxes and you end up getting a modest check for the amount you overpaid.

  What about the money made in interested on your escrow account? Oh, the mortgage company keeps that. Literally, they make money off of your money.

  The same is true of federal income tax. You pay in quarterly. That money goes into an interest bearing account. Come tax time you find out you over paid. You get a refund of money you could have kept and spent, but the government keeps the interest made off your over payment.
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  Iamallcool

  Good to know. Thanks!
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  Hecce

  The Origin of Tax Withholding

  So where did the withholding tax come from? It was not part of the original income tax that resulted from the sixteenth amendment in 1913. Very few people paid any taxes back then anyway. The income tax did not directly affect the average American until World War II.

  On the eve of the war, few Americans paid income taxes. Those that owed taxes paid them in one lump sum on March 15 (later changed to April 15). To pay for the war, the Revenue Act of 1942 lowered exemptions and raised income tax rates. But it also did something even more insidious—it instituted a 5 percent "Victory Tax" on all wages above an exemption of $624. The tax was to be collected by the employer and deducted from the employee's paycheck—just like the Social Security tax that began in 1935.

  The Current Tax Payment Act of 1943 then revolutionized the income tax by making withholding taxes universal. The withholding tax was part of the new tax plan offered by Beardsley Ruml (1894–1960), the chairman of the New York Federal Reserve Bank and treasurer of R.H. Macy and Co. By 1945, about three-fourths of Americans were paying federal income taxes. And although the withholding tax was sold as a wartime emergency, like most expansions of government instituted during wartime, it has been a way of life for most Americans ever since.

  The Curse of the Withholding Tax

  The income tax allows the government to confiscate the wealth of its citizens. The curse of the withholding tax is that it allows the government to commit this crime systematically, effortlessly, painlessly, and benevolently.

  https://mises.org/library/curse-withholding-tax
  
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  DesirousOfChange

  The Boston Tea Party was a revolt over 1/2 cent tax on tea.

  You let them get one foot in the door................and see what happens. (Just like a JW.)
  
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  Hecce

  Something that we have to admit is that in today's economy very few people have the discipline to budget for taxes and even to write a check quarterly.
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  DesirousOfChange

  A former employer (filthy rich guy) said if the business paid the employee in full -- the full cost the business must pay -- salary, payroll taxes, etc and the employee was forced to go to the Federal Tax Office (or Post Office) and pay the Income Tax, FICA (Soc Sec) Tax, Medicare Tax, State Income Tax by cash or check there would have long ago been a revolution against taxation.

  As it now, the employee never sees the "gross amount" and only sees the "net amount". An employee who clears $600 week feels he's only making $15/hour. In reality, his cost to the boss is likely about $25/hour.