Tax Day is April 15. While a day centered around paying taxes is far less exciting than Easter, we still have reason to celebrate lower taxes this year. How much do you know about recent tax cuts and tax day? Play “Two Truths and a Lie” to find out!
A. A larger tax refund isn’t a good thing.
B. High tax states benefit more from some provisions in the Working Families Tax Cuts.
C. The Working Families Tax Cuts only benefit high-income earners.
A. TRUTH! Typically, a tax refund results from having too much income withheld from your earnings for taxes over the year, so the federal government has had an interest-free loan from you and returns it each year. However, if your tax return is higher than usual this year, it is due to good major changes in tax policy thanks to the Working Families Tax Cuts. Because the tax cuts and changes took place mid-year, withholding levels held constant while the amount needed for taxes decreased. Increased deductions and credits will allow you to keep more of your income going forward. You can fix this before next tax season by adjusting your withholding level and keeping more of your income in your pocket, not the government’s.
B. TRUTH! Thanks to the increased limit in the state and local tax deductions, or SALT, taxpayers in blue states benefit greatly. This increased deduction allows taxpayers to deduct certain state and local taxes from their income. While this applies nationwide, taxpayers who itemize in blue states benefit more than red state residents because they typically carry the higher tax burden and can now deduct more from their income.
C. LIE! The provisions in the Working Families Tax Cuts primarily benefit low-income taxpayers. With lower tax rates, a larger standard deduction, a larger child tax credit, and no tax on tips, overtime pay, or Venmo transactions, lower-income taxpayers benefit the most from getting to keep more of their income. In fact, families making less than $50,000 will have their taxes cut by 15% while those earning between $100,000 and $500,000 will have their taxes cut by 10%. Tipped workers, families with children, and those working more hours to earn more money will benefit the most from the Working Families Tax Cuts.
Bottom Line:
A day centered around paying the government is not the ideal holiday, but this year we have reason to celebrate as more taxpayers get to keep their earned income. With average tax refunds increasing by 11% over 2025, Americans are seeing true relief from high taxes. More work is to be done in high-tax states and in the economy to improve affordability, but this tax day, you can rest with a little more money in your pocket.
To learn more, visit the Center for Economic Opportunity.