Sunday, February 4, 2018


Okay, let me get this out of the way right now, so people won't think that I'm being remiss. Speaker of the House of Representatives Paul Ryan (R-Wisconsin) is an idjit.

Right. Now, on with the show.

Speaker Ryan ignited a coffee-cup conflagration when he Tweeted the following: "A secretary at a public high school in Lancaster, PA, said she was pleasantly surprised her pay went up $1.50 a week... she said [that] will more than cover her Costco membership for the year."

Cue Democrats, advocates for low-income earners and other varieties of left-learning Americans jumping on the speaker.

But, okay, as I stipulated at the top of this post, let's say that Speaker Ryan (or someone on his staff) made a colossal public relations blunder (hence, idjit) in celebrating Julia Ketchum's modest change in circumstances. While it allows the opposition to enthusiastic virtue-signal to the choir, it basically misses the entire point.

As I understand it, Speaker Ryan's Tweet was inspired by this article by the Associated Press: "Tax bill beginning to deliver bigger paychecks to workers," which quotes Ms. Ketchum, and a couple of other people, making positive comments about the greater take-home pay they are seeing as a result of their employers implementing new guidelines on tax withholding put out by the Internal Revenue Service.

Note that is about tax withholding, not tax rates. That's an enormous difference, one that Speaker Ryan doesn't seem to appreciate. And neither did the handful of people quoted in the Associated Press article, all of whom seemed to see the money as available to spend in it entirely. But that presumes that their tax liability decreases by the same amount or more. So while Ms. Ketchum might be seeing $78 a year in lower withholding, unless her tax bill declines just as much, she's going to wind up giving some of that money back - either as a lower refund or writing the IRS a bigger check. And if that happens, and she's not prepared for it, it could be a problem.

Many American's really don't understand how the tax system works. This may be why 44% of respondents told Pew that the complexity of the tax system bothers them a lot. And not understanding the difference between paycheck changes due to withholding and changes due to actual changes in their tax liability is pretty clear indication that people don't understand their taxes.

You could, if you choose to, lay some of this at the feet of the press. The headline of the AP article is designed to grab attention, and discussion of the possible downsides of lower withholding (which, after all, is a "pay me now, or pay me later" sort of deal comes after the positive quotes. And you could blame politicians if you choose. One would think that Speaker Ryan's office would know the difference well enough to understand that lower withholding is not the same as lower tax bill.

But the fact of the matter is that very few people care about such things. I've seen a lot of people giving the Speaker grief about his holding up such a paltry sum as if it were life-changing, but pretty much nothing about the difference between a withholding change and a liability change. It's just not "sexy" enough. Maybe Speaker Ryan isn't the only idjit.

No comments: