The (Tax Refund) Check Is Not In The Mail
No one likes paying taxes, but this year Americans are taking things to extremes. Through last Friday, the IRS had received 13.3% fewer returns than the same period last year. And it seems like we’re not even really interested in starting the process: visits to IRS.gov are down 16.2%. All this means tax refunds – an important piece of disposable/savable income for many Americans – are down 14.4% versus last year. What’s going on?
A few explanations. First, the IRS has not been able to issue refunds to filers claiming the Earned Income Tax Credit, which last year totaled 27 million returns. That will start to be fixed next week and may encourage more filings. Also at issue: the 100% increase in Obamacare penalties to $695/adult and $348/child, something that concerns many filers.
Lastly, there seems to be some broad confusion about President Trump’s campaign promise of lower individual taxes and eliminating Obamacare and its penalties. The upshot: tax refunds add $250 billion to US consumer liquidity from February – May. This year’s payment cycle will be harder to predict and likely make an accurate read on the US economy more difficult for the next few months.
This post was published at Zero Hedge on Feb 28, 2017.