Have the tax bill changes been everything you expected? How can your business be the most successful in this changing tax environment?
I have two teenage boys and all they’ve been talking about for the last month has been the new Avengers movie. We finally saw it last week and had a great time. But we were left trying to evaluate what we really thought about it. After all the hype and excitement of the build up, did it live up to our expectations or did it fall short?
We’re kind of in the same situation with the new tax overhaul. It consumed discussion most of last year and dominated the news. But at the end of the day, how much did it really change our everyday life?
And All I Got Was A Jelly Of The Month Subscription
One of the big promises with this bill was that people would be able to take home more money because of changes to the tax code. The idea was that the average person would have less money taken out of their paycheck so they would, in theory, be making more money.
Most of us probably saw some sort of pay bump this year, but chances are, it’s been underwhelming.
It reminds me a lot of one of my favorite movies, Christmas Vacation. Chevy Chase thinks he’s going to get a massive Christmas bonus, so he decides to put a deposit down on a new pool. Instead, he ends up getting a Jelly of the Month subscription.
With an average increase of 1-2%, you probably feel like you got a Jelly of the Month subscription.
Now, I love jelly, so I wouldn’t mind a jelly subscription but I’d still prefer money for my bonus.
Likewise, if you find out you’re going to get a 1% raise at the end of this year, you’re probably happy, but you know it’s not going to change your life.
If you’re making $40,000 a year, a 1% raise would give you an extra $400 per year or $16 per paycheck. That’s not enough to blow on a new pool, but maybe you can get dinner out one night.
But if you spend your money wisely, you could end making this pay bump worth more than you think!
A Little Cash Can Go A Long Way
One of the biggest worries many people have about the money they’re receiving from this tax overhaul is that the numbers won’t be right.
Since this is the first year on the new system, we don’t know if we’ve withheld the right amount of money. Could you have to pay back that extra $400 you earned during the year? It’s possible.
The tax bill was hundreds of pages long and very few people have read the whole thing, even the politicians that passed it. So we won’t know all of the practical application until the end of the year. This is concerning for a lot of people.
CNN Money recently had a segment about the effects of the tax changes inviting me to speak into this topic. One person I had talked to said he and his wife had a good pay bump, but decided to withhold that money to prevent having to pay anything back later on.
This sounds like a great idea, but here’s where I disagree: Instead of withholding that money, giving it to the government and hoping to get it back next year, consider your emergency fund.
How much money is in your saving account or emergency fund? If you’ve read one of my posts or heard my podcasts before, you know what’s coming next.
If you don’t have three months of living expenses available as an emergency fund, this needs to be a priority for you.
By putting the extra money you’ve earned this year into your fund, you’ll prevent yourself from going into debt if something comes up later on, like an unexpected expense or even if you owe money back on your taxes.
Instead of spending that money or giving it back to the government you’ll have it available to pay back if need back.
Are There Any Benefits To This Tax Plan?
More than anyone, businesses are seeing the biggest pay bump from these changes. With the tax overhaul, corporate tax rates were cut dramatically.
Upfront, many companies have decided to pass that savings on to their employees, giving them bonuses of $1,000 in some cases.
This is great for a one-time benefit, but, call me a cynic, I don’t think we can expect businesses to do this every year. It doesn’t make sense.
So is there any real benefit for average-Joe employee? Hopefully!
One of the big goals with this tax plan was that it would spur more business growth to help offset the fact that the government will be receiving much less in taxes than we have in the past.
The hope is that if businesses have more money, they’ll hire more employees or pay their current employees more. In turn, their employees will have more money to spend at other businesses, and hopefully spur some growth in the economy. It’s a long-term plan and we’ll have to wait a while to see how it really plays out.
In the meantime, you probably haven't’ seen a massive change in your everyday life. After all the excitement, arguments and hype over the changes in this tax overhaul, has much changed for you? What has the effect been on your daily life? I’d love to hear from you, so reach out via my contact page and let me know!