Thu
Feb 14 2019
03:59 pm

According to the IRS, tax refunds are down 8 percent from the same time last year. But of course the GOP claims it has nothing to do with the tax bill they passed that promised larger refunds for the middle income. The GOP keeps shoveling it out, and the conservative voters keep consuming it and never seem to be bothered by the flies in their teeth.

NPR Article

R. Neal's picture

Here is the root of a lot of

Here is the root of a lot of the frustration:

"...when the Trump administration passed its tax cut, it also adjusted the withholding tables. That means the IRS took less money out of each paycheck. Changing the withholding tables did not require new laws and was not widely publicized, Thaler said."

So this is actually better. Instead of giving the government an interest free loan every payday, you get to keep and use the money. Ideally you should end up with no tax refund or better yet owe them a little.

On the other hand, a lot of people will pay more taxes because some deductions were reduced or eliminated.

JaHu's picture

So this is actually better.

So this is actually better. Instead of giving the government an interest free loan every payday, you get to keep and use the money. Ideally you should end up with no tax refund or better yet owe them a little.

This is true if someone is capable of sticking to a strict budget. But I think the majority of taxpayers would rather get a lump sum to be able to purchase large items with their returns. The government may be receiving interest free money, but it could actually be better for the person than paying loan companies or using a credit card at high interest rates for someone to make large purchases.
Or am I off base?

R. Neal's picture

Well, that's a valid point of

Well, that's a valid point of view for a lot of people. Another point of view is that the the IRS isn't a savings program.

But I get it that for a lot of people it's a way to force you to save. We were those people when we were younger.

And it's not like you get any interest on savings anyway these days. You're lucky if fees don't result in negative interest.

JaHu's picture

I just did a comparison of my

I just did a comparison of my son's 2016 and 2018 taxes. His are really basic which made it realitively easy. He did receive a tax reduction in 2018 but it was really minuscule. They reduced his tax rate by about .6 percent, so less than 1%. But isn't that even supposed to go away in about four more years?

bizgrrl's picture

It's a conundrum. If it's the

It's a conundrum. If it's the only way some people can save and have a little bit to splurge on vacations, bigger ticket items, etc. then so be it.

It is my understanding that there are more classes in high school trying to teach young people how to manage money. Christmas Club accounts, layaways, etc. have been used for a long time. I met someone when we were young (he was young as well) who explained how he had near to nothing taken out of his pay check for income taxes. He would put it in the bank to earn interest and then write a check at the end of the year to the IRS. Of course, as the Mr. mentioned, that was back in the days when you got interest on your savings account. And, those were also the days when you paid 7% + on your home loan.

It's a cultural thing that has to slowly change if reinforced to do so.

JaHu's picture

I feel that many people

I feel that many people perceive getting a tax refund is kinda like getting free money at the beginning of the year.

By having more taxes taken out of their paychecks, they learn to adjust their spending and never miss the extra weekly or bi-weekly cash in their pockets. To them it's like they never had it to begin with.

I would think the government could take advantage of the extra cash while they had it in their possession by drawing interest. But I'm no economist so I don't know if it would be feasible or even legal?

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