Tax refunds are smaller this year — and fewer people are getting them
Tax refunds are smaller this year — and fewer people are getting them
As the federal government hurtles toward running out of cash and the Treasury Department takes “extraordinary measures” to pay the bills, there’s one line item the Treasury can worry a bit less about this year: tax refunds.
It’s not likely to make a huge difference, but so far, the average refund amount is down more than 7% from last year, according to the IRS — that’s an overall decline of nearly $23 billion.
Last year, pandemic relief was still boosting tax refunds, said Francine Lipman, a law professor at the University of Nevada, Las Vegas.
“During 2021, Congress really put their hand into their pocketbooks and generated significant tax relief,” she said.
Refunds paid in 2022 were still loaded with economic impact payments and the expanded child and earned-income tax credits. Now, all of that’s gone.
“These benefits expired, and so the old provisions then were resurrected,” Lipman said.
Plus, fewer Americans have filed tax returns this year because those temporary benefits prompted more people to file during the pandemic, according to Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center.
“And I think that’s indicative of the fact that people became eligible for credits that they normally would not have gotten, that normally their income would have been too low,” she said.
Smaller tax refunds — and fewer people getting them — mean less spending power for consumers. While that might be good news to Jay Powell and the Federal Reserve as they try to cool inflation, Mark Steber with Jackson Hewitt Tax Service observed that it’s not so great for households.
“It certainly doesn’t make for a good experience at the dinner table when you’re talking with your family about what we’re needing to do and spend this year,” he said.
The book on 2023 refunds isn’t fully written yet, though. People who are feeling the effects of last year’s severe weather have extra time to file — some until mid-October.
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