NCPA - National Center for Policy Analysis

Tax Refunds Jump

March 28, 2001

Taxpayers are getting more of their money back from the Internal Revenue Service this year than last -- and they are getting it back earlier.

While some experts attribute this to greater use of electronic filing, there is another interesting explanation.

Mark M. Zandi, at, theorizes that many people expected to owe hefty taxes on anticipated 2000 stock market gains. So they boosted their withholdings for last year. But when the gains failed to materialize, they could at least enjoy substantial refunds coming their way.

Morgan Stanley economist William V. Sullivan Jr. made a study of the refund situation this year.

  • He found that the IRS sent out a record $38.9 billion in refunds this February -- $2.3 billion more than in the same month last year.
  • Total refunds for the full February-to-May cycle could range between $145 billion and $150 billion.
  • Even the low estimate would top last year's refunds by $10 billion.
  • Most households spend their refunds on items such as clothes, cars and furniture -- with the unspent portion often going to clearing away debt.

Source: Charles J. Whalen, "Economic Trends: Time to Spend that Refund," Business Week, March 26, 2001.


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