Tax refunds could face debt ceiling delays

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With the start of the 2014 tax-filing season delayed until Jan. 31, tens of thousands of taxpayers already have had to wait longer than planned for their federal tax refund.

Now those refunds could be threatened by the debt ceiling fight.

Debt deadline nigh

The debt ceiling is the limit on the amount of money that the United States can borrow to pay its bills. Last October, as part of the deal to reopen the federal government, the limit was suspended through Feb. 7. Treasury Department Secretary Jack Lew says his office can finagle things using so-called “extraordinary measures” to keep the country from defaulting on its bills through the end of this month.

But when the day finally comes in late February when the federal government must pay its bills but can’t unless it borrows more money, we are in big trouble.

And, say House Ways and Means Democrats, so are taxpayers who are waiting on their refunds.

Refunds delayed?

U.S. Rep. Sander Levin, D-Mich., the ranking Democrat on the tax-writing committee, wants a clean debt ceiling bill passed as quickly as possible. A clean bill would simply approve an increase in the debt ceiling, something that used to happen with regularity before the country became so politically polarized.

In recent debt ceiling debates, however, Republicans have demanded other fiscal concessions before agreeing to up Uncle Sam’s ability to borrow money to pay his bills.

Levin and his 15 Democratic Ways and Means colleagues sent a letter this week to House Speaker John Boehner, R-Ohio, warning that the GOP’s insistence on holding up the debt limit increase could be even more disastrous since this debt ceiling deadline is smack dab in the middle of the annual tax-filing season.

“Failure to act quickly will endanger our economic recovery and send a signal to American taxpayers that their refunds may be in jeopardy, potentially raising unnecessary panic among families awaiting their tax refunds (nearly 110 million refunds of $2,700, on average, last year),” wrote the Ways and Means Democrats.

Basically, the tax refunds are lined up to be paid out, but if the Treasury has no money to cut the checks, the distributions just stop.

Political debt ceiling chicken

Boehner and other Congressional Republican leaders say they don’t want the nation to go into default. But they are playing political chicken not only with Democrats and the president, but also with the staunchest right-wing members of their party.

Essentially, GOP leaders on Capitol Hill must at least look like they are fighting the good debt limit fight before agreeing to hike the debt limit.

Just how long this political Kabuki will continue is the question.

Taxpayers awaiting refunds hope the show doesn’t last long.

Are you getting a refund from the Internal Revenue Service? Who would you blame if it’s delayed even longer?

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Veteran contributing editor Kay Bell is the author of the book “The Truth About Paying Fewer Taxes” and co-author of the e-book “Future Millionaires’ Guidebook.”