Tuesday is Tax Day, the deadline for Americans to file their federal taxes.
The new federal tax overhaul has added many new wrinkles to this dreaded annual tradition—and the bulk of the law wasn't even in effect yet.
Lawmakers have made bold predictions about how the new tax law will impact middle-income Americans. Here in central Illinois, there is still skepticism about what it will mean.
Over the next year, GLT will follow four individuals and families: a widower, a local business owner, a single 20-something, and a couple with kids. We'll check in with them periodically as the tax bill impacts their paychecks, their employers, and many other parts of their lives.
Andy Streenz owns Bill's Key and Lock Shop with his dad. They have 10 employees and two locations—one in Uptown Normal, and that’s relocating to a new location on Clinton Boulevard in Bloomington. Streenz said it's not really a small business in the traditional sense. It's a micro-business.
“Oftentimes, the microbusinesses—the mom-and-pop stores—get lost in the fray because these big deals that politicians tout really don’t speak to them. It’s more these intermediate corporations,” Streenz said.
Streenz and his wife, Marie, live in Bloomington with their two young kids. Marie is an operations analyst at Midwest Fiber. Andy runs the family business.
They were both skeptics of the federal tax overhaul when it passed Congress in December. Marie thought all the tax breaks were going to go to big companies and the wealthiest Americans, as many analyses have concluded.
Andy was also lukewarm. He grew up in a Republican household and is a small-business owner. And the tax plan is supposed to help small businesses—lowering individual tax rates and providing an additional 20 percent deduction for companies filing as pass-through entities. But Andy thinks it might ultimately be a wash, costing a bit more in some ways, but saving him money elsewhere.
“I hope it works great. I hope the whole thing goes over exactly how they planned. I hope it makes the economy churn. I hope that they prove me wrong. I hope that it puts more money in our pockets. And I hope it makes life easier.”
“We’ll see,” he said.
Most Americans are seeing lower taxes as a result of the new law.
“Our tax plan will reduce taxes for our middle class and allow them to keep more of their own money. Keep that hard-earned money where you can spend it the way you want to, or you can also save it. Nothing wrong with that. But it’s your money. Not the government’s money,” President Trump said last fall.
But for Marie Streenz, so far the new tax law isn't making much of a difference in their family budget. She saw her paycheck grow by $15 a week. She jokes that she's pouring that right back into the economy—at the Coffee Hound.
“The benefit to us so far hasn’t been anything substantial. They kept saying, ‘This is great for everybody. You’re going to have so much more money available.’ That’s just not the case,” she said.
Andy and Marie say their household budget considerations are bigger than that. They've got a rental property that's been a challenge to keep occupied.
Health insurance is the real biggie. They pay $135 a week to insure their family of four. Andy's shop offers insurance to its employees. But they're paying more and getting less and less.
“In order for us to cover the costs, we’re having to chip away at benefits within their health packages. It’s getting rough. Next to withholding, it’s our most intense bill that we have to cover at the shop, is our employees’ healthcare,” Andy said.
Tax time can get complicated for Andy and Marie. It's a little bit simpler for Dillon Maher, 22, of Normal, a staffer at Illinois State University.
He's working his first job since graduating from college, out on his own for the first time. He gets paid once a month, and he's noticed an extra $80 or so in his paycheck.
“Sometimes whenever I tell myself I should eat in or not buy something, every once in a while, I think, well, I have this extra $80, so why not? But that’s only when I need the extra push. More often than not, it doesn’t affect the money I’m spending,” Maher said.
Maher grew up in McLean, a small town just south of Bloomington-Normal. His family is conservative, though he moved toward the middle when he went to college. He's voted in both Republican and Democratic primaries.
“A lot of times when I talk to people about what I think about (politics), my Republican friends think I’m too liberal, and my Democratic friends think I’m too conservative,” Maher said.
The average family of four making the country’s median income of $73,000 will receive a $2,000 tax cut, supporters say. But to help ensure their bill met the budget limits Republicans had set for themselves, lawmakers set many individual income tax changes to sunset after 2025. They made cuts to corporate tax rates permanent.
That means come 2025, middle-income taxpayers like Dillon would see their taxes go up unless Congress acts again. (House members like Rep. Rodney Davis say they intend to.) It's an issue Dillon was watching as the bill won final passage.
“It feels like if they were really concerned about people in the middle class, or in my situation, they would’ve done that the other way around, where cuts for the middle class lasted for a longer time, and cuts for businesses were re-evaluated later,” Maher said.
CONCERNS ABOUT SAFETY NET
Cindy and Kevin Gann are even more skeptical.
Cindy is a business analyst at State Farm. Kevin is a software developer. They live in Bloomington with their two school-aged children.
The tax bill lowered the corporate tax rate from 35 to 21 percent. That's one of the reasons many larger companies offered headline-making bonuses to their employees soon after the bill passed. Supporters of the tax rewrite say it will help business owners invest back into their business and potentially hire employees.
Kevin Gann isn't buying it.
“I’m a software person. I’ve been laid off enough times that I realize that companies are about making money. They’re not about making me feel good. They’re not about paying my bills. I’m responsible for that stuff. And I just don’t see that making companies richer will benefit my children in the long haul,” Gann said.
Kevin is also worried about the long-term impact of the $1.5 trillion tax cut on the federal budget. Earlier this month the Congressional Budget Office forecast the return of $1 trillion-plus annual deficits and a ballooning public debt that will approach $29 trillion by the end of the next decade.
Kevin thinks those deficits could be used in future fights over spending on social safety net programs.
“If there’s no funding for social programs in the future, you can’t have any. It will be easier to make the argument that they should be privatized,” he said.
Cindy Gann said she was very skeptical when it first passed. And that hasn't changed now that her paycheck is reflecting the new lower individual tax rates.
“I looked to see what the difference was in my withholding, and it was $30. But my health insurance goes up every year, so next year that $30 is going to be gone,” Gann said.
HEALTH INSURANCE COSTS
Health insurance is also a top concern for Mary Kay Kosur from El Paso. The 58-year-old was widowed three years ago.
She's since gone back to school at Heartland Community College to become a nurse. She's working part-time now and is paying big money out of pocket for health insurance.
“It’s been very expensive, and I’ve had to continually downgrade my coverage to keep the cost constant. And I think’s going to get a lot worse because we’re going to be losing some of those plans from the Affordable Care Act that really helped people in those lower income brackets,” Kosur said.
Kosur owns some farmland with her sister, and she itemizes her tax deductions because of her charitable giving. She doesn’t expect those to be impacted.
She recently asked her tax preparer to crunch some numbers about what the new tax law will mean for her. The answer has her watching her spending very closely.
“I’ve always been a cautious person. But I do look at each purchase a little more carefully and see if it’s something I really need,” Kosur said.
Kosur sees herself as politically moderate, even fiscally conservative, though she voted for Democrat Hillary Clinton in 2016 over Trump.
“Right now the GOP and the Democratic side—neither one are really seeing what the average hard-working citizen needs. They’re kind of going off on their own agendas,” Kosur said.
Kosur will graduate from Heartland in May as a registered nurse. She'll then enroll at Illinois State University to pursue her B.S.N.
GLT will follow Kosur and the other voices in this story throughout the next year or so. We'll ask them how their household budgets, their jobs, their businesses, and their health insurance are being impacted by this expansive legislation.
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