The Tax Mob Is Gathering

“They ripped me off.”“They stole my money — I am so angry.”These are just a few of the quotes from the media recently regarding the decreased tax refunds after the 2018 change in the tax code and withholding tables. Tax refund amounts were down 8% after the initial processing of 2018 tax returns, as of the first week of February 2019.

The unexpected can often result in anger, and quite often understandably so. While I can’t defend the way the government handled the change in the withholding tables to reflect the new tax code, I hope the angry actually take a moment to look at what they are angry about. Many of the angry taxpayers paid less taxes overall; they just had less taken out of their check each paycheck throughout the year. With the change in the employer withholding tables that accompanied the new tax code, many employees did not have as much withheld relative to the tax they were required to pay. It was not that they paid more in taxes, although they might have, it was that the government was not saving for them, like in years past.

To put things in perspective: I get my 2013 Tiguan filled up once a week, like clockwork. Imagine if after each fill-up the gas station added $10 to my bill. So, if I had $20 in gas,they would charge me $30. Then after the end of the year, they would “refund” me the 520 dollars (52 weeks x $10) they had overcharged me.

Imagine I got used to the refund. Each year I would pay downChristmas debt, or take a driving trip the Dells (a Wisconsin treasure). But what if one year the gas station decided to only add $5 on to my gas bill each week, and the “refund” was cut in half? Would I be angry? Yes, maybe a little. I would at least most likely be surprised.

If I had a financial coach, he/she might ask, did I notice the decrease in gas station spending? Why did I not save for the Wisconsin Dells’ trip myself? Why do I need the gas station to save for me? My coach might go further and ask, why not just use the emergency fund I set up? If I could call a dream vacation to the Dells an emergency (a shout out to the Gear Daddies)

We all get into habits, for good and for bad. We are all subject to momentum, especially when it comes to finances. And none of us likes to spend too much time on things we are forced to do, like taxes. Also, the government should have done a better job communicating the changes. It is also easy to miss things like less taxes taken out of our paycheck if something like increasing healthcare costs eat sup the difference. Or in my example, say gas prices increased. 

But if forced government saving is the only way we can save, it is time to take a hard look at our financial habits and financial well-being. A change may be needed. If thoughtful and disciplined, you will be a better steward of your money than the government. The government doesn’t pay you interest on your refund like a bank or credit union would.

If you are one of the angry, the disappointed, or just a surprised W-2 employees, you can use the IRS’s W-4 calculator to make sure your 2019 withholding is on track:

Financial well-being affects all parts of our lives. Make sure you do what you can so it has a positive impact and not a negative one.

Stay financially classy Minnesota!