The IRS just paid out a record $40 billion in tax refunds in a single day
On that day, the IRS paid out $40 billion in tax refunds, a record for the largest one-day payout ever according to JP Morgan Economist Daniel Silver.
"The IRS had some technical and security issues early in this tax season which likely delayed the processing of tax returns and caused some people to postpone their filings," said Silver in a recent note to clients.
This led to tax refunds underperforming last year's year-to-date value by about $25 billion up until the massive windfall, which made it appear like there may be an economic problem.
"Twenty-five billion dollars is about 0.2% of annualized consumer spending, so this shortfall in refunds could have slowed consumer spending over time," wrote Silver. "But there was a record $40 billion payout of refunds on February 10, and since then, the refunds to date this year have been tracking much closer to those from last year."
The money paid back to Americans in tax refunds so far this year is now roughly equal to cumulative outlays at this time in the past few years, and just slightly below last year's year-to-date total, alleviating any worrying economic signals coming from the data.
"As of March 22 this year, individual refunds totaled about $180 billion," said Silver. "This is only a few billion below the figure at a comparable time last year, and above the figures reported for some earlier years (almost 60% of the full year's refunds are typically received by this point in the year)."
In terms of macro trends, Silver said that returns show that there should be little drag in expected consumer spending though the delay may cause a shift in the timing of spending.
Additionally, tax withholdings show that the labor market is still strong.
"The slowdown in withholding taxes was potentially a sign that labor income or job growth was weakening," said Silver. "But the withholding data started firming very late in January and have been looking solid since then. This looks consistent with many other signals that momentum in the labor market remains steady."
So on the macro scale, this tax season is sending good signals. And for those that got their refund on February 10, congratulations, you were part of history.