Jordan Zimmer
Do Tax Refunds Boost The Economy?
If there’s one thing that most Americans have in common, it’s that they don’t like taxes. Every year, millions of citizens file their taxes in which many give up 15% or more of their total revenue at the end of the financial year. Taxes have many benefits such as helping improve public services, such as roads, schools, parks, and so much more. But often times people owe less than the sum of the total amount of the estimated taxes that they paid. Therefore tax returns are essentially are exactly as they sound, they are a refund. The amount that is overpaid for will be returned.
Based off of IRS statistics, approximately 77% of Americans who filed taxes will receive a tax return this year, averaging $2,798 per person (TIME). According to CreditDonkey, 44% of the surveyed people will spend their returns will make a big purchase.
Research shows that the people who make big purchases after their tax return often are a direct correlation with stimulating the economy.The reason being is because when consumers have extra money laying around, people have a tendency to spend it. Therefore because they are spending more money, money will be flowing more freely as compared to stuffing your mattress with money.
Logically, when the demand for goods increases, the supply amount also will change too depending on the market. Many economists argue about whether tax returns boost the economy. The answer, well, it's debatable. An argument by one economist might might say that it doesn’t boost the economy because they are just receiving their own money back. However, another economist might argue that it does help boost the economy because the money they receive back is in one big chunk. Therefore, because many aren’t used to receiving so much at once, they may have an incentive to go out and spend it. With both arguments to be valid, the argument is yet to be solved. What do you think? Do tax refunds boost the economy?
Works Cited
Cloutier, Richard. "How Tax Cuts Stimulate the Economy." Investopedia. N.p., 30 Mar. 2017. Web. 24 Apr. 2017.
Mannino, Naomi. "Survey: Tax Refund Statistics." CreditDonkey. N.p., n.d. Web. 24 Apr. 2017.
"Tax Refunds: Do They Boost the Economy?" Time. Time, n.d. Web. 24 Apr. 2017.
I believe that a tax return is just that a return, Americans would have no higher propensity to save if they received the funds in one lump sum or over the year. Because of this, the only difference between the two options is that with one, Americans are more likely to make larger purchases, while with the other Americans are more likely to make many smaller purchases.
ReplyDeleteWhile getting a tax refund or break from the government is a good thing in most cases, the question arises whether this money could have been spent on something that would benefit everyone like additional education spending, infrastructure spending and/or drug offender rehabilitation. There are certainly cities that could use some urban renewal.
ReplyDeleteI think that, yes, tax refunds do boost the economy. I know that when I got my tax refund this year, I spent it on nice things for myself because I had the extra money and why not treat yourself. It's money that you didn't previously have, and if you were doing fine without that money that you are able to spend it now. People may choose to spend their tax refunds at the mall, restaurants, towards a new car, etc. These all factor into the GDP, which affects the economy. I think it'd be interesting to do research on whether GDP rises after tax season, and to see if the total amount of money spent in one city, or area increases due to tax returns.
ReplyDeleteTax refunds give people intensive to buy larger, more expensive products. These may be a new car, TV, appliance, or any other good that people do not buy often. Because of this lack of major purchases, total sales of these companies are not very high and they may sometimes have a shortage. But when people get their tax refunds, they will have a reason to buy one of these goods that they do not generally buy that often. Because of the high prices of these goods, they benefit the producers and the economy greatly, especially if these goods are American made.
ReplyDeleteThe idea of tax payers spending their money all at once on a big purchase, are contributing to the economy seems to be the most logical thought and idea in this situation. When people have such a big chunk of money at once many people don't know what to do with it other then to spend it. Most people spend it on new vehicles which happens to be one of the largest areas that the government takes their tax cut out of. Which is also a big way the government would measure the inflation within our country allowing everything to be leveled out in price to prevent inflation, or deflation over all.
ReplyDeleteWith tax refunds happening, people are more drawn to spending it because it is free money to spend at your will, with businesses boosting prices at that time it would be a waste, so saving 80% and spending 20% would be the more beneficial action taken.
ReplyDeleteIt does make sense that when people are receiving their tax return that they will go out and spend it, because often times when we have extra money it is spent. This is why demand will change after tax returns, because an increase in income changes demand. I think it is smart to save this money though, especially if it is a more substantial amount of cash. People in high school typically only get about $100 back though, and they like to spend it right away. This money does keep the economy moving, but isn’t large enough to completely change it. I feel like many families anticipate how much money they will be receiving back, and then use it for important items like rent. Overall, these tax returns probably minorly affect the economy and GDP, as more spending money will be spent.
ReplyDeleteThe main contribution to the economy is the tax payers money. When the tax payers get this cash back they see it as a bonus or free money they didn't see the first time around with money that was taken out of their pay checks. This is the tax payer lottery in my eyes, people that get large loads of cash quick are more likely to spend it fast on things they may or may not need. But no matter what if they buy stuff quick or not the money stays in the money/tax flow as long a they don't put it away and save it.
ReplyDelete