Americans incensed at lower tax refunds. But why?

If I owed you money, but decided to pay it back sooner than you expected, would you complain?

Apparently most Americans would because that’s what they are doing with their lower tax refunds. Because the IRS lowered withholding, refunds are lower or non existent this year. Many, perhaps most, Americans didn’t notice their take home pay increased during the year.

Focus on your net taxes paid, not the refund.

The Trump tax law lowered income taxes for an estimated 65% of taxpayers and raised them for 6%, according to the Tax Policy Center. 29% saw their taxes unchanged.

Looks like doing the right thing was a bad political move. The administration should have left withholding alone and Americans would be cheering their larger refund checks.

I told you politicians don’t understand human nature.


  1. Very few news programs are telling their viewers that withholding was adjusted, but plenty are interviewing the ill informed with their complaints about a lower refund. I have never made more than $25,550 per year, but I have always done my own tax returns, even when I had rental property from 1983 to 1986. It is so much easier to complete tax returns today, with so many free on line programs. I often wonder why so many people with simple returns, just wages and dependent info to enter, pay someone to do their tax returns. In the 80s, an IRS employee told me to make my withholding so that I received a small refund or had a small tax bill to pay, it is not a savings account. It is very easy for anyone to adjust their withholding on their W-4, if they want a larger refund. But, does that really help their overall financial condition, I think not.


  2. It’s a form of loss aversion, but without an actual loss. People are looking at refunds and not total tax liability – which is what really matters.

    Liked by 1 person

  3. While I am sure it is only those with lower refunds who are complaining, the interaction between withholding and refunds hasn’t changed all that much – at least with respect to returns filed through the end of the month of March.

    The number of returns processed to date is slightly lower – about 90MM so far (compared to 91+MM compared to the same period last year), however, the average refund is almost the same – declining .7% (not 7%) from $2,893 to $2,873.

    Your basic point, however, that many Americans really don’t understand income taxes, is spot on! You have to ask, was that intentional?



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