Reversing a trend from early in the tax season, the average tax refund has risen to over $3,100 matching last year’s levels.
Treasury Secretary Steven Mnuchin confirmed what a few of us have been predicting would happen. He explained to CNBC:
"People have been very focused on tax refunds.Tax refunds are up 17 percent week over week. That basically gets us to the same level as last year."
All of the grumbling, alarming headlines, and misleading information from lawmakers like Democratic Senator Kamala Harris can now stop.
Sen. Harris earned four Pinnochios from the Washington Post for her misleading tweet about smaller refunds drawing a direct link to the Republican-passed tax cuts as the culprit.
As I explained yesterday in the Washington Examiner, here’s why it was folly to jump to those conclusions:
The IRS data was based on a small sample size, likely smaller than the typical, non-shutdown year sample. There were fewer returns submitted and processed than during the same period a year prior.
Also, early tax filers tend to have just wage income and simple returns. They may be accustomed to a big refund and get less this year, but that doesn’t mean they didn’t benefit from the tax cuts. The tax cuts allowed taxpayers to keep more of their hard-earned income all year long in bigger paychecks.
Let’s make something clear:
A big tax refund is not a windfall like winning the lottery or finding a wad of cash in the street. It’s money that you overpaid to Uncle Sam, who held it hostage all year long and finally released back to you the following year after you file tax returns.
While a fat check from Uncle Sam may feel satisfactory, it’s not a reward, bonus or extra money. It’s your money.
If only, our education system would include some basic financial literacy, people might not fall for the false headlines.
There are benefits to having bigger paychecks all year long instead of a big refund check:
Paying the right amount in taxes throughout the course of the year makes it easier for people to budget accurately, plan for expenses, and, ideally, make room for savings. Instead of banking on a big lump sum to pay a major bill, which was the most popular reported use of tax refunds, a person could pay it down consistently over time, reducing interest or fees incurred along the way. For lower-income Americans, who incur late fees or rely on expensive emergency loans, the added income from each paycheck could be a better path to economic stability.
We’ll continue to follow how this tax season unfolds, but hopefully lawmakers, like members of Congress, and the press will stop pushing this misleading narrative about tax cuts and tax refunds.