Tax filing season is just around the corner. This has never been anyone’s favorite time of year. But, the uncertainty created by the current partial government shutdown has understandably created a bit more angst than usual.
The Treasury Department and IRS have been proactive in taking steps to minimize the burden of the shutdown on taxpayers. They recently announced that tax season will start as planned on January 28th.
They have confirmed that taxpayers can expect refunds to be sent out as usual should the shutdown drag on. This is the right conclusion legally and the right call for taxpayers, which I told IRS Commissioner Rettig when we spoke recently.
Congress has explicitly provided for a permanent appropriation for the IRS to pay tax refunds.
This makes common sense. A tax refund represents the taxpayer’s money, not Congress’, not the governments, but the taxpayer’s – despite what some people in Congress seem to think. And, it should be returned in a timely fashion.
With around 75 percent of individuals receiving a tax refund on an annual basis, many have come to look to their refund to make important purchases.
Whether that’s to replace an old water heater, make a down payment on a reliable vehicle to get them to work, or just to make ends meet.
It would be wrong for the government to impose undue financial strain on families across the country because Congress and the President can’t get their act together.
As we continue to work through our differences, the least we can do is return to taxpayers their own money.
This tax season of course is a little different, not only because of the shutdown, but also because it is the first under the tax reforms and tax cuts enacted by the Tax Cuts and Jobs Act.
A lot of work has gone on to get us here. Treasury and the IRS have been working diligently, but swiftly to ensure taxpayers have the information they need.
In a little over a year – they have put out 16 proposed regulations, two final regulations, 45 notices, 21 revenue procedures, and updated countless forms, publications and other guidance – all geared toward implementing the law and addressing taxpayer questions.
Right out of the gate Treasury and IRS went to work updating the annual withholding tables so taxpayers could immediately begin seeing the benefits of lower taxes in their paychecks.
Of course, whether a taxpayer had less or more withheld from their paycheck is not the final word on whether one received a tax cut. Also, due to changes in withholding a smaller or larger refund than usual may not tell the whole story.
I encourage taxpayers to compare their 2019 tax return with that of previous years to see the difference. At the end of the day, the vast majority of taxpayers will see that less of their hard earned money is going to the government.
A chief priority for the new withholding tables was accuracy.
Extensive analysis was done to help taxpayers get the right amount withheld from their paycheck – not too much and not too little.
However, no withholding table will ever be perfect.
Every taxpayer may be affected a little differently under the new law based on their personal circumstances. The IRS continues to consider whether future improvements to the withholding structure may be necessary, which I support and will be monitoring as Chairman of the Finance Committee.
The IRS has also embarked on an extensive campaign to alert taxpayers to check and update their withholding. This included establishing an online withholding calculator to help them determine what, if any, adjustments to their withholding may be necessary.
That being said, there are still going to be some taxpayers who may discover that they were underwitheld due to changes in the law and owe tax at the end of the year.
A subset of these taxpayers could be subject to a penalty tax for underpayment.
The Ranking Member raised this concern in a letter to Commissioner Rettig on January 3rd requesting that penalty relief be granted. I generally agree with the Ranking Member and have encouraged the IRS to be lenient on penalties, especially with this first time through a filing season under the new tax law.
If a taxpayer is underwitheld as a result of changes in the law – not through fault of their own – the IRS should consider what actions the agency can take to provide penalty relief.
But the issue of underwitholding due to the passage of tax reform should not be exaggerated.
Yes, as the Ranking Member claims in his letter to the Commissioner, it is estimated that as many as 30 million taxpayers may have had taxes underwitheld from their paychecks.
But, what hasn’t been said is that 30 million is actually only a 3 percentage point increase from how many taxpayers would be underwitheld under the old law.
Moreover, just because a taxpayer was underwitheld during the year does not automatically mean they will be subject to a penalty tax. Safe harbors have long been in place to protect taxpayers whose withholding is slightly off from being penalized.
It is quite possible that some issues will arise this filing season that we did not anticipate and will need to be fixed going forward. We already identified a number of those issues, which I’m hoping my Democratic colleagues will allow us to fix to further help all our constituents.
But, that doesn’t detract from the fact that we have delivered real tax relief to middle-income families, small businesses owners, and the family farmer.
Nor does it undermine the fact that we modernized our outdated international tax system and improved American business competiveness in the global economy, which will benefit the American worker.
These efforts have contributed to a strong and growing economy.
The unemployment rate is at a half a century low. Wages are rising at the fastest rate in nearly a decade.
And workers, employers and small business owners are all more optimistic than ever.
Unfortunately, I hear increasing calls from the new House majority pledging to erase the progress made with the tax cuts and reforms we enacted last Congress.
At least one new Democratic member has suggested bringing back top tax rates as high as 70 percent to pay for a wish list of far left, big government programs.
Such a confiscatory tax rate targeted at a relatively small number of wealthy taxpayers would barely make a dent in the cost of the programs they wish to implement;
Policy makers across the globe abandoned such punitive tax rates over the past several decades for their negative effect on economic growth, investment, and the incentive to work.
While tax rates of 70 percent or higher may have been fairly common in the 1960’s, today not a single OECD country boasts such a high rate.
How soon people forget about the prolonged economic stagnation and high unemployment of the 1970’s when we last had tax rates as high as 70 percent.
Why would we want to go backward – toward stagnation, pessimism and joblessness?
I hope the talk of such confiscatory taxation truly is the talk of a few rogue members and not representative of things to come.
I would like to think there will be opportunities for us to work together. I am firmly in the camp that the tax reforms and tax cuts enacted in the last Congress represent important revisions to our tax laws.
But, I understand that no major piece of legislation is perfect and to the extent there is legitimate interest in improving the tax law, I’m all ears.
When it comes to making modifications to tax reform, our first order of business should be focused on examining how the law affects individuals, families, and the businesses in our states that provide jobs and benefits they rely on. And, where necessary, we should work together to take action and ensure the law is fulfilling its potential.
A key part of this discussion should be enacting tax technical corrections – revisions to ensure the bill does what members thought it did when they voted on it.
I also hope that there would be plenty of opportunity to work on a bipartisan basis on tax issues involving everything from education to renewable and alternative energy to consumer-directed health care options.
However, I fear opportunities to work together could be put at risk should my colleagues become fixated on tearing apart tax reform, hiking taxes, and going after the President’s tax returns.
I want to put my Democratic colleagues on notice that I have no intention of:
- Undoing structural changes implemented as part of tax reform. This includes the lower tax rates and family benefits like the increased child tax credit and standard deduction. Nor am I interested in eliminating the cap on the deductibility of state and local taxes or backtracking on our move toward a more territorial tax system;
- Raising tax rates on pass-through business owners and farmers or corporations, all of which provide critical jobs and contribute to economic growth across the nation;
- Or going along with efforts to weaponize the authority of tax-writing committees to access tax returns for political purposes. Such an action would be unprecedented.
Mr. President, I am optimistic that we can continue to make progress helping Americans improve their lives by keeping more of their hard-earned wages, taking the chance of starting a new business, or continuing to expand an existing one – in short, building an opportunity economy.
I invite my colleagues to join me.
I yield the floor.