For better or worse, former President Trump’s legacy has been cemented. Barring a 2024 comeback, the Trump era is now in the history books and time will be his administration’s judge. One of the most enduring parts of that legacy will be the outgoing president’s impact on taxes. The 2017 Tax Cuts and Jobs Act (TCJA) was Trump’s signature legislative accomplishment and one of the most consequential victories of his only term in office.
While it’s true that the TCJA lowered the tax burden for most Americans, the tax cuts it delivered were hardly distributed evenly. Even many of those who did wind up paying less in taxes still got the unpleasant surprise of a smaller refund than they had gotten used to receiving.
Keep in mind that for many lower-income Americans, the average tax refund is the household’s biggest cash infusion of the year. Here’s why Trump might not have had the best impact on your taxes.
Last updated: Jan. 20, 2021
Many Refunds Are Actually Smaller Now
It’s true that the Tax Cuts and Jobs Act did accomplish for most Americans what its title claims: It cut taxes. There’s a difference, however, between lower taxes and bigger refunds. The law also restructured the tables the IRS uses to withhold tax payments throughout the year, so many people got smaller refunds despite actually paying less in taxes because less was withheld from their checks throughout the year.
Get Prepared: Tax Year Deadline Dates You Need To Know
Some Mourn the Loss of the Personal Exemption
Many Americans were able to do away with the headache of itemizing and take the simpler personal exemption instead after the TCJA nearly doubled it to $12,000 from $6,350. The tradeoff, however, was the loss of the personal exemption. Before Trump’s changes, taxpayers could claim exemptions of $4,050 for themselves and their dependents. This lowered the taxable amount of income for many families more than the newly increased standard deduction.
Rich People Got Better Refunds Than You
Unless you’re one of America’s top income earners, it’s probably best to reserve your gratitude for any increase you noticed in your refund. The truth, according to a study from tax experts at Policy Genius, is that the biggest breaks went to those who needed them the least. Those who make $50,000 a year or less received fewer refunds after Trump’s tax reform, with the lowest earners seeing the biggest dropoff in money returned from the IRS. Those who made between $50,000-$100,000 received 2.5% more refunds than before. Those who made up to $200,000 got 45% more refunds worth more than 200% more. Those with an AGI above $1 million got 216% more refunds worth nearly 400% more.
Find Out: Tax Loopholes Only the Rich Know
Corporations Were the Real Winners
Most Americans got a tax cut from the TCJA, but the reality for middle-class America was a mixed bag. The legislation reduced individual income tax rates, shaving the top tax bracket down from 39.6% to 37%. The reduction for corporations, however, was much, much starker. The corporate tax rate was reduced a full 14 percentage points — more than five times the 2.6% reduction for individuals — from 35% to 21%. In total, the IRS collected 22.4% less in corporate taxes in the first year after the law’s passage. Despite your gains, it was, in the end, big business that got the real refund.
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This article originally appeared on GOBankingRates.com: 4 Reasons People Should Not Be Happy With Donald Trump’s Impact on Taxes