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This is an example of the pervasiveness of financial illiteracy in our society. These people claim they did not get a tax cut... well, they did, in terms of a bigger paycheck. If they noticed a much bigger paycheck why did they not save that extra money? These ignoramuses are equating a refund to how much they are taxed, when one does not know how to do basic math that is how it is I assume
wow, tons of assumptions
So I'm not going to call these folks "ignoramuses" maybe I am one too. I admit I most definitely do not understand our tax code.
As to why they didn't save, again I'll go back and re-listening but I didn't hear any thing about no savings.
well my refund went down, I'm not making anymore money and I'm pretty sure I have a savings
well, it is technically better to owe money than to get a refund. A refund is your own money coming back to you that you loaned freely to the government. It's a bad idea. At a minimum you could've taken that money and put in high yield savings and got a few bucks interest. $2000 at 2% is 40 bucks, may not be much but you can go and have a nice dinner with it instead of donating it to Uncle Sam.
Also, these people act like it's free money that they are "relying" on... which is ridiculous. It's money that they already earned that's being returned to them. It's not a grant from the government. Whether they get it upfront or in the end makes no difference whatsoever which makes them financially ignorant.
I think you've got it right. Most people have no idea how the financial world works. They think in terms of hourly wages and 40 hour weeks 2 week vacations and then they reach their limit of comprehension.
It won't change, though. Not ever.
I can't remember the last time I had a federal tax refund. I look at what percentage of my total gross income did I pay as income taxes in a given year.
2018 was my first full year as a retiree living off private pension income. I did not tap into IRA or investment income yet. I don't get social security yet, my private pension is plenty to live on. I'll let my SS keep racking up to higher amounts until age 68 or 70. My retirement income is much less than when I was working, but I moved from high tax and high cost coastal Southern California to Arizona. I rent an inexpensive apartment, so I have no mortgage interest or property tax deduction. The 12K standard deduction turned out to be a good deal for me, because I am no longer paying the high California state income taxes as I did in my working years. I have almost nothing to itemize. Also, I ended up in the 12 percent tax bracket for my taxable income. So all in all, I ended up paying a much lower percentage in taxes than I did in my higher earning working years. That is no surprise, because we all know that our tax system brackets ratchet up when your taxable income goes up. I never had many deductions, so I always ended up in much higher brackets than now.
Sadly, the main stream media has only been fueling this misconception. Note, in my case, my refund was less than it was last year, but that's because I am in a higher tax bracket than I was in last year and have fewer write offs that I could claim to reduce my taxable income.
Note, I already invest to a high level, so I don't mind if I give the government a little extra each year that is refunded. Its not the "wisest" choice (unless you'd have a difficult time/lack discipline to save yourself), but there is no real consequence to me doing so.
Now expand this "reporting" to every single story "the news" covers and you'll see why CBS/MSNBC/CNN/Fox/etc lose credibility on pretty much anything they cover that they can slant to further their agenda.
I'm not a Trumpitier or Faux News or Rush follower at all but for god's sake I wish the MSM would report with an unbiased slant for once.
Agree with the OP. I'm not sure of the extent of the ignorance, but for those that equate a larger refund with less taxes paid, they are indeed ignorant. There's no other way to put it. What I like to look at is the effective tax rate, which is total taxes paid (including those paid or refunded when filing) divided by taxable income. You can play around with those numbers further if you know what you're doing to look at deductions and exemptions (or lack thereof) to figure if the new tax law was to your benefit or detriment. Also agree it's better to owe come tax time, actually best to owe as much as possible without having to pay a penalty. That's like a free loan from the government.
I read another article about this new tax law. Summing it up, it basically said that while there were many changes causing confusion, the average tax owed for individuals was expected to be about $1,600 less than the previous year. Assuming the average income stayed the same or went up, that's a lot of money. It was also expected to benefit the rich the most, but I'm assuming the lower earners will also benefit. Keep in mind these were all predictions by some study, so not a sure thing. I don't like how the media plays this up by mainly focusing on refunds and often not even a mention of the expected reduction in individuals total tax owed.
well, it is technically better to owe money than to get a refund. A refund is your own money coming back to you that you loaned freely to the government. It's a bad idea. At a minimum you could've taken that money and put in high yield savings and got a few bucks interest. $2000 at 2% is 40 bucks, may not be much but you can go and have a nice dinner with it instead of donating it to Uncle Sam.
Also, these people act like it's free money that they are "relying" on... which is ridiculous. It's money that they already earned that's being returned to them. It's not a grant from the government. Whether they get it upfront or in the end makes no difference whatsoever which makes them financially ignorant.
If you underpay on withholding, then you have to pay penalties and interest at effective total interest rates of 6%-9%. It doesn't necessarily make sense to pay this type of rate in order to avoid the opportunity cost of not earning 2% on your savings. In practice, getting your withholding exactly right is nearly impossible, so you're always going to be a little bit over or a little bit under.
Best practice is to try to get a small refund rather than a large one, but trying to get no refund at all is rather silly and often doesn't work in your favor.
All the so-called tax savings is coming from two places. One is less government spending today and the second is essentially taking out a huge loan that our children will need to repay with future taxes. Even less government spending today rolls that cost to the future for example if you don’t repair federal highways and bridges or stop doing research on newly arising diseases. I’ve always been a pay as you go type person, within reason, and one who keeps up with home and vehicle maintenance to keep total costs down.
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