The TCJA Is Making Our Tax System—and Tax Season—More Burdensome
February 5, 2024
By Emily DiVito
With tax season upon us, a bevy of taxpayers have taken to social media to decry their unexpectedly paltry returns. While this data is anecdotal (indeed, tax season only just started, and most people’s returns could actually be larger this year), the mechanics of why taxpayers might be surprised at their tax bills for 2023—when no major tax law has been passed in years—illuminate a foundational problem: The Tax Cuts and Jobs Act (TCJA) of 2017 made our tax system harder to navigate. Like much of recent tax policymaking, the TCJA’s fiscal accounting tricks made our tax system more difficult for individuals and families to make sense of, disadvantaging them against big businesses and the wealthiest households. But instead of a tax code that places the burden of navigating it on individuals and families, we deserve a tax system—and a federal government—that takes on that burden for us.
Conservatives intentionally complicated the structure of the TCJA in order to make the bill politically viable—that is, to make it seem less costly and more beneficial to workers and families than many economists knew it would be. One example is that the TCJA “sunsetted” certain major provisions, but not others. For instance, the TCJA permanently slashed the corporate tax rate (from 35 percent at the high end to a flat rate of 21 percent), but tacked on a 2025 expiration date for many of the (much smaller) cuts for low- and middle-income families.
This kind of tax policymaking also serves the political purpose of kicking the can down the road—to a time when it will be a different set of legislators’ responsibilities to deal with the fallout of expired tax cuts or credits. Just last fall, former House Speaker Paul Ryan, one of the TCJA’s primary architects, admitted he made temporary the cuts that he thought had a better political chance of being extended (i.e., the individual provisions, including the Child Tax Credit), while he made permanent those that would face political opposition to being extended (i.e., the corporate cuts). The fruits of that approach are bearing out now. After House approval last week, Congress seems poised to extend the poverty-alleviating enhanced CTC—a program the TCJA would have had expire at the end of this year, leaving millions of families out to dry. But intentionally phasing major provisions in or out—especially life-enabling programs like the CTC—long after a bill has passed can be destabilizing for taxpayers reliant on at-risk provisions, reducing the dependability of government services.
Fundamentally, this dynamic—that the tax code can change in material ways without the public’s keen awareness—disadvantages most individual taxpayers who can’t afford to spend precious time, energy, or money tracking changes to the tax code, and it advantages the corporations and wealthiest households that can. Functionally requiring taxpayers to track relatively technical changes to the tax code if they want to have a good understanding of their tax liability before they get their bill is not even remotely realistic for most taxpayers. More than that, it’s not fair.
It’s still too early in tax season to determine if most taxpayers will see net increased or decreased returns. And indeed, the Internal Revenue Service (IRS) modifies certain elements of the tax system every year to keep pace with changing economic conditions, including, as it did this year, by adjusting the income tax brackets for inflation. But rather than a system that requires families to navigate a vast and constantly changing system, we deserve—and the IRS can administer—a tax system that is much less onerous for individual taxpayers.
Thanks to the Inflation Reduction Act, this year the IRS is offering a free filing option, cutting out the middlemen of private tax preparation companies that have, it turns out, been cheating people out of their money for years. Direct File, currently being piloted for tax season 2024, allows eligible taxpayers to file directly with the IRS for free.
Direct File is a huge achievement that will deliver real gains to millions of taxpayers and their families. Moreover, it starts to move us away from a tax policymaking paradigm that overburdens low- and middle-income families and toward one where the federal government utilizes its full capabilities to undertake that effort for you.