Low tax refunds are a good thing, explained
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Low tax refunds are a good thing, explained

The media and the Democrats worked overtime to convince roughly four out of five Americans that the 2017 Tax Cuts and Jobs Act would actually raise their taxes. That campaign is now bearing fruit on Tax Day 2019, just one in three Americans approve overall of the bill that not only slashed taxes for the middle class but also rendered our corporate tax rate competitive on a global scale.

But of all the bad economics and left-wing mythologizing spurred by the Tax Cuts and Jobs Act, no lie is so profoundly dumb and pervasive as the notion that diminished tax refunds harm the public.

As of late last month, taxes refunds were down by about $6 billion compared to the same point last year, prior to the Tax Cuts and Jobs Act going into full effect. That’s because withholding was decreased so that, with the new, lower tax rates, the government wouldn’t be taking an effective loan from millions of taxpayers. In fact, the Obama administration did something like this as part of the 2009 stimulus package.

But for many dishonest journalists, the reduction in withholding is a bad thing this time, because ‘Orange Man Bad.’

At New York Magazine, Eric Levitz forbodes:

Roughly three-quarters of households usually get money back from the IRS — and for many American families, that deposit is the largest lump sum they see all year … And Americans had reason to expect their refunds to be even higher than usual this year, what with those tax cuts that the Republicans had been promising.





Many Americans are seeing slightly higher tax refunds than in the past. But 1.6 million other Americans — who received tax rebates in 2018 — are discovering that they actually
owe the government money this time around. And the impact of more than 1 million Americans experiencing a sudden, sharp decline in their anticipated purchasing power has proven far greater than that of a much larger group of taxpayers seeing modest gains.


Is this fulmination intentionally dishonest or just raw idiocy? It’s hard to say, but given that the usual suspects have begun to wield out this line of attack, it’s worth explaining why lower tax refunds — assuming all other things being equal — are unequivocally good for the economy and for the taxpayers receiving them.

2/ Already this April, we’ve learned that tax refunds are down this year by $6 BILLION.

— Alyssa Milano (@Alyssa_Milano)
April 14, 2019


Now, think about this for a second: Whatever amount of taxes the government eventually refunds to the people is effectively an interest-free loan previously seized from taxpayers. The bigger your refund each year, the more the government stole from you.

Money has a time value. If you have a dollar today, it is worth more than a dollar you get tomorrow, for two reasons. First, because money is worth less over time due to inflation. Second, because in the interim you had an opportunity to invest that money and earn at least some interest. But if the government holds onto cash that is rightfully yours for several months of the year, then you’ve lost that earning potential.

In addition, money kept out of the private sector for longer than necessary causes economic growth to slow. Reduced refunds play a small part in the larger reason why the Tax Cuts and Jobs Act will pay for roughly 20% of itself in the next decade, it means more money in the pockets of consumers, investors, and businesses.

To frame the tax refund issue as a matter of depriving Americans of “the largest lump sum they see all year” isn’t just lunacy; it’s malicious and dishonest. It intentionally confuses the public into believing that tax refunds are a gift from the government. when in fact they merely represent the government returning your own money to you, unjustly withheld for months without interest. In a perfect world, Americans would receive zero dollars in tax refunds and simply pay a lower tax bill out of each paycheck, or better still, government would trust people to pay their own tax bills on tax day itself, without withholding.

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