Treasury Department Defends Lower Refunds, Saying They Are Positive Sign

By:
Chris Gaetano
Published Date:
Feb 15, 2019
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Treasury Secretary Steven Mnuchin, in response to reports that taxpayers were getting lower refunds than expected or even owing money when they usually get it back, said that this state of affairs should be seen as a good thing, as it means people are not overpaying the government as much, according to Bloomberg. He said that taxpayers should be seeing the positive impact in the form of larger paychecks. However, economists cited by Bloomberg said that this perspective ignores the psychological effect of tax refunds—namely, that we tend to notice big lump sums more than small increases over time. Consequently, people will be less likely to spend their tax refunds, and therefore less likely to put a large amount of money back into the economy. And this is even assuming that taxpayers receive a refund: the Government Accountability Office said that the number of people who will owe the IRS money is expected to shift from 18 to 21 percent as a result of the new tax law. 

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