The New Tax Bill Hides a Cost to Middle Class Families in Plain Sight
The one-page tax return was always a myth.
A big rhetorical draw of the GOP’s Tax Bill, which passed the Senate in the early hours of the morning, was its long-touted simplicity. President Trump, in a televised address on December 13, promised that, in the wake of tax reform, Americans would be able to file their taxes on a single sheet of paper. Other politicians said the same, even going as far as to call it the “Postcard” tax filing. This was met with understandable enthusiasm. As of 2014, the tax code took some 73,954 pages to explain and 538 reported that Americans spend nearly six billion hours annually filing their taxes. This notable American inefficiency — Jeb Bush’s campaign claim that Estonians file in five minutes was accurate — supports an entire tax software industry. As of this week, companies in that industry are seeing their stocks spike. Why? Because American taxes will remain arcane and confusing to American families.
After Paul Ryan and Texas Representative Kevin Brady announced the “Postcard” tax bill when, H&R Block, a company that processed 19.7 million tax returns last year alone, briefly suffered. On the day of the announcement, their shares dropped 2.7 percent, and their stock 24. Not a small number.
But the quick dip was just that. After it became clear that the tax bill’s purported radical changes were just sales patter, H&R Block’s stock bumped back up to just 10 percent below its November 2nd standing, now clocking at 28.25 points. Intuit’s stock also dipped as well in November and as the smoke and mirrors around the bill cleared, their stocks rose again. Today, they’re about seven points higher than they were on November 2nd. Stocks aren’t just an indicator of vested interest: H&R Block and Intuit spent over $5 million last year on lobbying efforts to keep taxes complicated.
Most Americans don’t file their taxes themselves and, if stock performance is any indication (it is), that’s unlikely to change despite the fact that more than 70 percent of Americans use standard deductions.
Why is this significant for families? Because it makes financial planning incredibly difficult. As long as the tax code remains maddeningly complicated, the results of the annual reckoning will be unpredictable to wage earners and caregivers. That’s bad for families and ultimately bad for the economy because it makes people understandably cautious about spending money. The only people who this is good for — and it’s very good for them — are those in a position to take advantage of tax loopholes and tax accountants.
The GOP bill will pass the House soon and make its way to Trump’s desk well before tax filing season. Before that even happens, H&R Block will profit. Its stock jumped 2.14 percent today.