People Outraged Over Lower Tax Refunds But Treasury Says Refunds Above Last Year

Mish

Are tax refunds higher or lower than last year? Apparently both, depending on whom you believe.

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.

Anger Mounts

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

Comments (41)
shamrock
shamrock

"Average" refund is up, "typical" refund is down. The 1% getting big ones?

No. 1-21
Mish
Mish

Editor

excellent comment shamrock. I added this line: And as one of my readers noted, averages are misleading. A few big winners can balance out a huge number of losers.

douglascarey
douglascarey

Total taxes paid by the middle class are down. Don't try and do too many mental gymnastics on this. And don't believe the biased mainstream media. Some refunds are down ONLY because many people saw their take home pay go up due to withholding.

JonSellers
JonSellers

I know a couple of folks who were shocked when they had to pay $2000+ when they were used to getting small refunds. I think there are a couple of issues here:

  1. The big tax payment is psychologically much more painful than the happiness of a small bump in the weekly paycheck. It's not like the average Joe starts working on investment strategies for the $50 bump. He just buys better beer.

  2. The big jump in the standard deduction was a throat-cutter to middle income folks who have big mortgages and live in high-tax states. I bet Mish got a little kick in the tail on that one.

A whole bunch of pro-Trumpers are burning their MAGA hats. As for me, after dumping $30k+ into non-taxable retirement systems on a decent six-figure salary, I'm getting $39 back. And I paid Taxact $29 for the privilege. I'm going to buy a six-pack of some decent beer with the $10 difference.

Ted R
Ted R

Just goes to show you how misleading news headlines can be. Especially in the era of internet based news.

Zardoz
Zardoz

So... where is your source of ultimate truth?

Carl_R
Carl_R

It is also true that a few big losers can average out for a lot of winners. Certainly those in high tax states, with big mortgages are probably worse off. Meanwhile, those in low tax states, and/or without mortgages, are probably better off. The ones who are worse off are going to make a lot more noise than those who are better off, so of course it will seem that there are more of them.

Bam_Man
Bam_Man

People living in high-tax "Blue" states are now feeling the sting of the $10,000 SALT cap. Boo-hoo!!

Greggg
Greggg

Munchkin is a Skull and Bones member, so you can't believe anything he says anyway.

RonJ
RonJ

The L.A. unified School District is putting a property tax increase on the ballot, to pay for their capitulation to the teachers union. The teachers union will be happy to take anyone's tax refund.

Six000mileyear
Six000mileyear

I did a comparison. I computed my taxes based on both old and new rules. My tax bill is lower under the new rules. Single, no kids, renter. Results may vary depending on one's situation.

Curious-Cat
Curious-Cat

Wouldn't we all pay much closer attention to government spending if payroll deduction were eliminated and we all had to write out a check for the full amount of our taxes each April 15?

Thalamus
Thalamus

Purely political hitjobs on Trump to affect marginal voters.

ReadyKilowatt
ReadyKilowatt

The only reason I claim 0 dependents on my W4 is because I don't wish to make quarterly payments. Over the last few years any refund I receive goes right to paying down the mortgage, so I won't really miss it anyway.

KidHorn
KidHorn

There are many where I live that have to pay a lot more because property taxes are so high. And these are the people who complain and make the news because the news loves anything anti-Trump.

WCVarones
WCVarones

That Michael K Richards tweet makes no sense. How does a middle-income guy in a low-tax state end up paying more? There's more to the story.

ksdude
ksdude

"....IRS choose to pay the benefit out of every paycheck". Say what? Benefit? We've been reading to much AOC lately. Her motto is "if we take your money, we can keep your money".

Zardoz
Zardoz

Surprise surprise, the con man wants the largest con in history to continue.

Sechel
Sechel

i'm outraged. even though i don't itemize i came out worse because i can't deduct my state and local taxes. that's like being taxed twice on the same dollar

AshH
AshH

Perhaps looking at the median refund is more appropriate?


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