Ordinarily at this time of year, we don’t see Americans scrambling to pay taxes before Republican-imposed changes kick in, but these are not normal circumstances.
With the GOP tax plan poised to take effect in a few days, many taxpayers want to pay for next year’s property taxes before Jan. 1, hoping to take advantage of a break that will soon be reduced. The rush has been so significant, the IRS has published some guidance on the subject, advising homeowners that the payment may not be tax-deductible.
Part of the trouble, of course, is that Republicans insisted that their tax plan take effect on Jan. 1. The result, as Politico reported last week, is “real-world chaos.”
America’s new tax system will go into effect in just 12 days, and payroll companies are bracing for confusion as they figure out new withholding rules that will affect millions of American paychecks.
The Treasury Department and the IRS will have to quickly write new regulations to implement the new law, governing everything from the tax regime for businesses that don’t organize as corporations to the endowments of the nation’s elite universities and how multinational corporations are taxed on the profits they make abroad.
Sen. John Thune (R-S.D.), who helped negotiate the GOP package, told Politico, “There will always be bumps in implementation with the IRS, and probably technical corrections to follow. There usually are with big bills like this.”
And while there’s some truth to that, what’s different in this case is the break-neck speed: Republicans unveiled a radical overhaul of the federal tax system in November, passed it in December, and are implementing much of the new law in January. “Bumps” are to be expected when implementing bills like this, but federal policymakers usually take months, if not years, to craft the details of the plan, and then take more months before any changes kick in.
This had less to do with a slow, lumbering bureaucracy and more to do with preparing everyone – IRS officials, regulators, localities, everyone who works in payroll departments – for a smooth process.
This year, Republicans decided not to bother with careful considerations. The lead time between congressional passage and the implementation date wasn’t even two weeks.
Worse, there was no practical reason to rush. Congress faced no external deadlines. There’s no economic crisis that demanded immediate changes. The practical case for rushing effectively did not exist.
The American Payroll Association warned Congress in early December that its members “are starting to panic, on behalf of themselves and millions of employees, about the effect on 2018 withholdings of a tax bill that will be effective a week after its enactment.” A spokesperson for the trade associated added last week, “Putting something into effect a week after it’s signed – I don’t know how you can expect good results.”
Politico reported in mid-December, “Some people who sell their homes may find they owe thousands more in taxes; investors could pay more when they sell stocks; and undocumented immigrants could find themselves cut off from a popular child tax credit Republicans plan to expand…. Payroll administrators worry they won’t be able to make changes to tax withholding by the first of the year, and both large and small businesses may face altogether new tax rules that many scarcely understand.”
Common sense suggests everyone involved would benefit from a slower, deliberate process. Republicans heard all of these warnings and concerns and decided to ignore them.