Smaller-than-expected tax refunds surprise some Steamboat residents
STEAMBOAT SPRINGS — Slightly more Americans received tax refunds this year, but what really has Americans talking, including locals, is the size of those refunds.
Of all the tax returns filed, about 300,000 additional people got a refund, an increase of about 0.1% compared with last year. The average refund amount was $2,725 this year, a drop of $55 from last year, according to data released Wednesday by the Internal Revenue Service.
This marks the first filing season under President Donald Trump’s new tax laws, which received significant pushback from congressional Democrats.
Among those who balked at a slimmer check from the government was Michael Fitz, a planning technician for the city of Steamboat Springs and a part-time mechanic at Steamboat Ski & Bike Kare.
Last year, Fitz said he received about $2,600 from the IRS. This year, his refund was $600.
“I was excited for tax time to come, but then I couldn’t use that money,” he said.
Fitz recently signed a contract to buy his first home and was hoping for that extra cushion to buttress his finances.
“I made the decision to go ahead with the purchase anyway, but missing $2,000 was noticeable,” he said.
Because the IRS only provides data on the average refund, it is unclear how many Americans received a significantly smaller check this year compared with last.
But, getting a smaller refund is not necessarily a bad thing.
Greg Henion, a certified public accountant at THPK in Steamboat, explained a major impact of Trump’s new tax laws is a change to how businesses withhold money from employees’ paychecks.
“With those changes, less money was being withheld from wages,” he said.
When someone receives a refund, it just means they paid the government too much and are receiving the surplus. Because workers paid less in taxes throughout the year, the IRS did not owe as much to many taxpayers come Tax Day.
Financial experts, including Henion, tend to see this as a good thing. When taxpayers receive a larger refund, that means they essentially gave the government an interest-free loan for the year. A smaller refund means people got more money in each paycheck that they could use when they needed to, instead of waiting for tax season.
But, like many Americans who look forward to that annual chunk of cash, Fitz prefers to have a larger tax refund.
“I think withholding money is better because it makes me live within my means more,” he said. “It’s like a savings account.”
Henion said the new tax laws had a varied effect on taxpayers this filing season.
“Some folks definitely benefitted with the change, and some folks ended up paying more in taxes ” he said.
The Tax Policy Center, a nonpartisan think tank, estimates the new laws gave about 65% of Americans tax cuts.
John Spezia, a retired college professor, was disappointed to notice a tax hike. He paid 10% of his adjusted income in taxes this year, compared with 1 to 2% in previous years.
Spezia believes the tax cuts give more benefits to the wealthy than to the middle or working classes.
After 2025, all individual tax cuts are scheduled to expire, according to the nonpartisan Joint Committee on Taxation. Conversely, the new tax code gave permanent cuts to corporate rates.
An article from CNN pointed out that Congress has extended temporary tax cuts in the past, but there’s no guarantee of that in the future.
That uncertainty is why Fitz will no longer plan around receiving a hefty refund from the IRS.
“The government can always change its mind,” he said. “I know because I work for part of it.”
Support Local Journalism
Support Local Journalism
Readers around Steamboat and Routt County make the Steamboat Pilot & Today’s work possible. Your financial contribution supports our efforts to deliver quality, locally relevant journalism.
Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.
Each donation will be used exclusively for the development and creation of increased news coverage.
Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User