| Taxes necessary, but not necessarily fair |
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Tax-free loans
to government
Nearly 40 percent of Americans look forward to getting
a hefty tax refund each year. They could adjust
the tax withheld from their paychecks and make
better use of their own money.
"They are giving Uncle Sam a free loan every year -- and like it that way," says Bankrate's McBride. "These are most often people under 35, with household incomes less than $50,000, and living in the Northeast. In other words, those with tight budgets struggling to keep up with the cost of living who could most use a few extra dollars in each paycheck instead of giving it to Uncle Sam."
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Imprecise about tax withholding |
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| Which of these scenarios best fits the way you handle your tax bill? |
Total
(1,004 respondents) % |
18 to 34
(143 respondents) % |
35 to 49
(230 respondents) % |
50+
(569 respondents) % |
| You look forward each year to getting as big a tax refund as possible |
38% |
52% |
39% |
28% |
| You adjust your tax withholding so you don't get a big refund or owe a big tax bill |
34% |
27% |
39% |
37% |
| You have the least amount withheld from your paycheck so you pay up at tax time |
13% |
11% |
15% |
15% |
| Don't know/refused |
15% |
10% |
7% |
21% |
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"I think a bunch of people see that as a bonus or extra money," says Hughes of OMB Watch.
Over three-quarters of filers receive refunds and the average refund size in 2006 was $2,324. "That's an extra hundred bucks a paycheck," says McBride. "Who couldn't use an extra hundred bucks a paycheck?"
While paying in the extra tax money is without question a free loan to the government, some people view it as an effortless savings mechanism. Saenz, a CPA, says that for some, it's easier to let the government "hold onto it and give it back as a lump sum refund. Probably they have a harder time holding onto money and prefer the government save it for them."
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