How Money Walks Author Travis H Brown on Fox and Friends on Tax Day 2019

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If you haven’t checked your paycheck since the Trump Tax Cuts passed last year, you might want to do a double take. New filing data from H&R Block confirms that the average American’s tax liability shrank by nearly 25%, or $1,200, last year. This amounts to $100 in paycheck savings every month that American families can reinvest in their local economies or stash away in their savings account. The news gets even better – H&R Block has so far found that tax liabilities have, on average, shrank in all 50 states regardless of political affiliation.

The 5 states with the largest reduction in tax liability, in order, were New Jersey, Massachusetts, California, Georgia, and Connecticut. 3 of those states, California, Connecticut, and New Jersey, are solidly blue but have continued to benefit from the Trump Tax Cuts thanks to a $10,000 deduction for state and local income taxes (SALT deduction) and higher exemptions and phase outs for the Alternative Minimum Tax (AMT).

While H&R Block finds that nearly 2/3rds of Americans have seen their taxes go down, a poll from the Tax Policy Center finds that just 40% actually believe that this has occurred. The New York Times notes that “as taxpayers filed their returns, many found that they were due smaller refunds than in the past, which may have further skewed perceptions of the law”. In reality, their tax reductions have been baked into every paycheck for over a year now. Remember – a refund from the government means that the taxpayer paid too much money in the first place. Shrinking refunds are actually a good thing!

This means that the red states who saw refunds increase significantly, as much as 7-8% in places like North Dakota and South Dakota, need to adjust their deductions properly to ensure they are not withholding too much money from their citizens. In blue states, where refunds decreased as much as 5-6% in D.C. and Maryland, taxpayers should take advantage of the continued SALT deduction, higher exemption for AMT, and other taxpayer-friendly changes that were implemented.

Your federal income tax rate applicable to you is essentially the price that your government puts on your work.  When that price goes down for most working families, it is only natural that America has seen, well, more work.  This good news for our national economy should translate to good news for you and yours.

Remember, with several tax-deferred options to save pretax income, all the while such funds can invest for higher yields (than zero from the IRS), now is a great time to make improvement to your personal financial plan.