People Outraged Over Lower Tax Refunds But Treasury Says Refunds Above Last Year
The Trump tax cuts front loaded the impact by giving people more money weekly. The net benefit was positive for most people, on average, but because the IRS chose to pay the benefit out of every paycheck, year-end returns will be smaller.
Outraged but Shouldn't Be
The New York Times explains Why People Are Outraged at Lower Tax Refunds (but Probably Shouldn’t Be).
Both these things are true: Most Americans received a tax cut in 2018. But many will see a smaller tax refund than they are used to when they file their 2018 returns.
And plenty of those people are irate about this, as evidenced on Twitter and in news coverage.
But Economics 101 would suggest that this trade — getting the money early and receiving a smaller refund or owing money to the I.R.S. at tax time — is the better deal.
- The Washington Post writes Millions of Americans Could be Stunned as their Tax Refunds Shrink.
- The New York Times says Smaller Tax Refunds Surprise Those Expecting More Relief.
- ZeroHedge commented today Millions Of Americans Are Getting Angrier: Tax Refund Shortfall Hits $46 Billion
Tax Cut Tweets
Wait a Second
The US Treasury says Average Tax Refunds Up 19 Percent from Last Week and Consistent with 2018 Refunds.
Through four weeks of the filing season, the average tax refund in 2019 increased to $3,143, a significant jump from last week’s average of $2,640. The average refund at this point in the filing season is now up 1.3 percent over last year based on 47.7 million individual returns processed thus far in 2019 compared 49.2 million returns processed in 2018.
As previously stated, the increase in the weekly data is primarily due to the remainder of the Earned Income Tax Credits and Child Tax Credits being paid out this week. Despite the higher refund average, we remind taxpayers that weekly filing season data is variable and will continue to fluctuate. We caution against drawing broad conclusions on refunds overall this early in the filing season.
So are refunds up or down? Yes and yes.
And as one of my readers noted, averages are misleading. A few big winners can balance out a huge number of losers.
Beauty is in the eye of the pocketbook.
Mike "Mish" Shedlock