Income Tax Refunds Up, But Less Than Expected

Author: Jonathan Weisman

Published: February 28, 2004

Early tax refunds have climbed an average of $97 over last year's, the Internal Revenue Service said yesterday, a figure far lower than economists had estimated after last year's tax cut.

The early figure has economic as well as political implications. President Bush has counted on large refunds to remind voters of last year's tax cut, and economists figured that the extra cash would prime the economic pump once more.

The IRS reported that through Feb. 20, more than 40 million returns have been filed, a 2.6 percent increase over this time last year. Refunds have totaled $72.8 billion, up from $66.9 billion, while average refunds have climbed $97, to $2,292.

Last week, the Treasury predicted that because of last year's tax cut, average refunds would be $300 higher than they otherwise would have been. Between higher refunds and lower tax payments this filing season, taxpayers should have an added $50 billion, Bush predicted.

Treasury spokeswoman Tara Bradshaw stressed that the $300 estimate was not an attempt to predict average refund levels this year compared with last year. And she said most taxpayers have yet to file returns.

But independent economists have said the levels are markedly off predictions. L. Douglas Lee, who publishes the Economics From Washington newsletter, said last week that refunds in the first six weeks of tax season were up $6.5 billion, "substantially less" than most estimates, which expected increases of $20 billion to $30 billion.

Leonard E. Burman, a tax expert at the Urban Institute, said the refund figures may be depressed because tax returns from affluent filers have been delayed by complications from the tax cut on capital gains and dividends. Companies, mutual funds and stockbrokers have had difficulty calculating taxable capital gains and dividend payments because the rates on such investments dropped in the middle of last year.