Don't expect this year's tax-filing season to jolt the economic stimulus movement. In an April 13th address, Internal Revenue Service Commissioner Doug Shulman noted that tax refunds usually "kick-start the economy" in the spring. But this year is a lot different from other years. Fewer refund dollars will be allocated to discretionary spending this year, even though the average refund is $2,700 this year, compared to $2,500 last year.
Although an Associated Press-GfK poll released April 13th shows 38% of respondents acknowledging their intent to spend some of their refunds, most of those expenditures will be for food, clothing and other necessities. The majority (54%) of respondents receiving refunds who expect to use these monies for credit card and other debt is a significant jump from the 35% of refund recipients who did so last year. Moreover, refund recipients are a bit more inclined to saving some of it than they were last year. Two bright signs: Tax refund allocations expected for vacation spending and auto purchase down payments are higher this year than last.
Tax refunds are going directly into taxpayer hands. This is one reason not to correlate the tax-filing season's expected impact with stimulus bill measures and forecasting their short-term and long-range effects. Still, this year's tax-filing season signposts are not encouraging ones, at least not for the most part.