Some in York County may see refunds dip under new federal tax law
Mary O'Neill, a Lewisberry resident, got less of a tax refund this year than in the past — and that was with prepping for tax policy changes.
"But I'm happy I don't have to pay," O'Neill said. "Some back is better than paying."
O'Neill had warning from her H&R Block tax analyst, Julie Hall, last year when anticipating adjustments. At Hall's suggestion, O'Neill opted to withhold more of her paycheck throughout the year.
Other York residents may see similar cuts to their refunds — or in some cases owe money — when filing this year because of sweeping changes approved in 2017's federal tax overhaul, according to those familiar with the policy.
Backers of the bill, largely Republicans, claimed it would help most Americans. However, the average refund for early filers is down 8.7 percent from 2018 in the first three filing weeks of 2019, according to the Internal Revenue Service.
"I really think the answer of why people are seeing a big difference is they got money earlier in the year and didn't catch it," said Richard Butler, assistant professor of accounting at York College. "Most of us did say, 'Hey, we got extra money,' and didn't question it."
Changing withholding tables meant many taxpayers may have had "extra money in their hands and didn't realize it," from each paycheck, he said.
Beyond withholding tables, the policy rich with changes will affect residents' tax refunds differently depending on the individual situation, Hall said.
Lower rates, limited deductions: The Tax Cuts and Jobs Act of 2017 adjusted tax brackets, lowering tax rates for individuals of all incomes, and roughly doubled the standard deduction for both individuals and married couples. It also eliminated various deductions, including capping the State and Local Tax (SALT) deductions at $10,000.
Pennsylvania is one of six states with SALT deductions, which essentially kept residents in higher-taxing states from paying federal taxes twice.
The SALT cap's effect will likely be "more muted" in Pennsylvania, which has lower income and property taxes on average than neighboring states, said Jeffrey Johnson, spokesman for the Pennsylvania Department of Revenue.
The Tax Policy Center estimated that 5 percent of Pennsylvania taxpayers will see a tax increase under the new plan, he said. That's compared to more than 8 percent of residents in California, Connecticut, the District of Columbia, Maryland, New Jersey and New York estimated to see a tax increase, he said.
The median household income for a York County family between 2013 and 2017 is $61,707, according to the most recent census data. Under new tax brackets, the average York County resident would be taxed at a rate of 22 percent, instead of 25 percent.
That same resident may have lower refunds, or in some cases owe money, based on other policy adjustments. Additional changes include eliminating deductions for union dues and other expenses incurred in trade or business.
Those taken by surprise this year can take measures to ensure a refund more in line with what they're used to going forward, Butler said.
For example, if someone owes $2,000 a year, he or she can withhold $40 from each weekly paycheck.
"If they want more back, have them withhold more each paycheck," Butler said.
The intricacies of the bill make it difficult to make a general statement as to how it will impact area residents as a whole, Hall said.
"Everybody's situation is unique; I have not seen any two returns anywhere similar," Hall said. "Everybody has different things that impact them with the new tax law. The best thing to do is for people to ask questions."
For example, families with children might see a larger refund because of the child tax credit increase from $1,000 to $2,000 per qualifying child, Hall said. Taxpayers without dependents might see a smaller refund without being able to itemize or get reimbursed for business expenses, she said.
"The new tax law seems to be (that) we don't know which way to decide. We don't know what's good, or what's bad or anything like that," Hall said.
"So we wait until the client comes in and try and get the facts and we try to help them as very much as possible. And whatever situation they're in, we try and compare and say, 'This is what changed, this is what you can do with the new tax laws,' and see what could benefit them," she said.
H&R Block employees have been in training throughout the year to familiarize themselves with the new policies ahead of tax season, she said.
"The new laws are very different and very unique from past laws," she said.
'Corporate giveaway': Aspects of the bill hurt the working class at the expense of the wealthy, according to U.S. Sen. Bob Casey, a Democrat who sits on the Senate Finance Committee.
"It was a rushed, corporate, rich people giveaway, and I think a lot of middle class families are going to pay the price for it — short term and long term," said Casey, who did not vote for the bill.
U.S. Sen. Pat Toomey, and Reps. Lloyd Smucker and Scott Perry, all Republicans, voted in favor of the tax reform. Republicans argued the tax overhaul would supercharge the economy and bolster small business.
The GOP-backed bill cut the corporate tax rate from 35 percent to 21 percent. And while all income levels received a tax break, cuts were disproportionately made to favor the top tax brackets, Casey said.
"Tens of millions of people in the middle would say, or the Republicans down here would say, lots of people in the middle got tax breaks. That's actually correct, but when you look at it by way of a percentage, they got hell of a lot less than the top 1 percent," he said.
Little can be done by way of corrective legislation to counteract the damage done by the policy overhaul, he said. Finance Committee Chairman Chuck Grassley, R-Iowa, said earlier this month that he would not consider modifying the SALT deduction, according to CNBC.
"We'll see what happens in the committee, but it's difficult to envision a way to make changes to the original bill that will put us on a different track," he said.