Millions of Americans who received tax refunds in previous years could find that they owe money to the federal government this filing season. No doubt that news will come as an unwelcome surprise to individuals and families who had been counting on a refund check, but now find themselves in debt to the IRS. But does it matter, from a policy perspective, how many taxpayers receive money back or owe extra at tax time?
Yes. Although the refund statistics do not tell us how many households benefitted from the Republican-backed tax cuts that went into effect this past year, refunds do matter to the overall health of the tax system. A sharp reduction in the number of taxpayers receiving refunds would likely lead to higher levels of tax evasion and avoidance—and could erode faith in the federal tax laws.
In a nutshell: Refunds matter, though not for the reasons that many taxpayers and some politicians think they do.
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