Business News Daily receives compensation from some of the companies listed on this page. Advertising Disclosure


Survey Finds Most Consumers Were Uninformed About 2017 Tax Cuts and Jobs Act

Andrew Martins
Andrew Martins

A new study reveals consumers' surprise at the effect of the 2017 Tax Cuts and Jobs Act.

It may be a while before we know the Tax Cuts and Jobs Act's full impact on the 2019 tax season, but preliminary data from a recent survey suggests most taxpayers were unprepared and professionals didn't clearly inform them of the changes prior to yesterday's filing deadline.

Conducted by Janus Henderson Investors, the survey polled 1,002 U.S. adults on how they viewed the Tax Cuts and Jobs Act of 2017 and its effect on their 2018 tax returns.

Matthew Sommer, director of the firm's Defined Contribution and Wealth Advisor Services team, said this year's proprietary survey was the result of "mixed feedback" from the firm's advisors and clients regarding the Trump administration's flagship piece of legislation.

"The data confirmed what we had been hearing in qualitative feedback, which is that higher-income taxpayers ended up paying more in taxes than they expected," Sommer said. "In addition, filers were uninformed about the tax changes, which we believe presents an opportunity for financial advisors to be more proactive in helping clients understand the new tax law and individual implications."

Expectation vs. reality

As more and more taxpayers began getting their refunds earlier this year, one narrative remained consistent for most – that the average taxpayer was receiving a much smaller tax return than in previous years.

According to Janus Henderson Investors' survey, that disappointment was largely felt among higher-income households. Among the 254 respondents who reported a yearly household income above $100,000, 42% said they paid more in taxes last year, even though just 36% expected to have a higher tax liability. Similarly, 19% reported paying less in taxes, compared with the 28% who thought their tax liability would have been lower.

Officials said the discrepancy between how much these respondents expected to pay and how much they actually paid likely stems from the Tax Cuts and Jobs Act's $10,000 limit on state and local tax deductions.

"While all taxpayers benefit from five of the seven marginal rates being reduced, higher-income households with substantial property and state income tax liabilities may find that the lower rates are not enough to offset the new restrictions applied to their itemized deductions," officials wrote.

While higher-income homeowners showed a disconnect between their tax expectations and reality, the firm's survey showed that most respondents' tax liability was "on par with their expectations." When asked to think about how much they paid in taxes over the year, along with any outstanding liabilities or refunds, officials said 32% expected to see an increase from 2017, even though 30% saw a larger bill.

Communication breakdown

Even though the legislation was signed into law by President Donald Trump in December 2017, the survey found that most consumers said they were uninformed about the Tax Cuts and Jobs Act's impact on their taxes.

Respondents were asked to rank their comprehension of the legislation's importance on a scale of one to five, with the low end denoting "not familiar at all" and the high end suggesting they were "very familiar" with the legislation. Officials said the mean score from respondents was 2.05.

Additionally, respondents were asked how much they would be able to deduct if their property tax was $4,000 and their state tax was $8,000. Just 10% of respondents gave the correct answer of $10,000.

Officials said a major contributor to this lack of understanding was a need for financial professionals to be more proactive in informing clients about how the bill directly affects them.

Respondents with higher household incomes were more likely to utilize outside professional help. Even so, respondents in households that had hired a CPA or financial advisor said they weren't given information to take better advantage of the legislation.

Tax debts and refunds

When it comes to paying back any debts with the IRS, more than half of higher-income households (56%) said they would withdraw money from a checking or savings account to cover the difference. Of the households with incomes under $100,000 that received a tax refund, 38% said they planned to save the money, while 23% said they were planning to spend it.

The survey also examined how people use their refunds. It found 22% of respondents said they would use their refunds to reduce debt. The other top priority was establishing an emergency fund (15%). Officials said those two plans were also the top priorities for higher-income households. [Looking for online tax software for your business? Check our reviews and best picks.]

Image Credit: MK photograp55 / Shutterstock
Andrew Martins
Andrew Martins
Business News Daily Staff
Andrew Martins has written more than 300 articles for and Business News Daily focused on the tools and services that small businesses and entrepreneurs need to succeed. Andrew writes about office hardware such as digital copiers, multifunctional printers and wide format printers, as well as critical technology services like live chat and online fax. Andrew has a long history in publishing, having been named a four-time New Jersey Press Award winner.