Tax refunds are about 10% smaller this year compared to the year before. Many Americans are feeling the effects as inflation remains high and pandemic-era relief winds down. Mark Strassmann takes a look for the “Tax Time” series.

#taxes #inflation #news

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The start of tax season usually brings anticipation and excitement for Americans, who are often eager to receive their tax refunds. However, this year, many Americans have been left disappointed by the size of their tax refunds. This is due in part to high inflation, which has had a significant impact on the economy.

Inflation is the rate at which the general level of prices for goods and services is increasing, leading to a decrease in the purchasing power of currency. The current inflation rate in the United States is at a 30-year high, driven by supply chain disruptions caused by the COVID-19 pandemic, as well as significant government stimulus spending.

As a result, prices for everyday goods and services have skyrocketed, leaving Americans feeling the pinch. This has also impacted tax refunds, which are typically calculated based on how much money was withheld from an individual’s paycheck throughout the year. If that amount was not enough to keep up with inflation, the tax refund will be smaller than expected.

The situation is further complicated by changes to the tax code implemented in 2018 by the Trump administration, which altered the way deductions are calculated. This has also led to smaller refunds for some taxpayers.

For many Americans, a tax refund is the largest lump sum of money they receive all year, and it is crucial for paying off debt, catching up on bills, or making a necessary purchase. However, smaller refunds can leave people feeling financially insecure and uncertain about their future.

The Biden administration is aware of the impact of high inflation and has taken steps to address it. The Federal Reserve has indicated that it plans to raise interest rates to curb inflation, and the administration has proposed a $3.5 trillion spending package aimed at investing in programs that would help reduce costs for families.

In the meantime, there are steps that Americans can take to manage the impact of small tax refunds. This includes adjusting the amount of taxes withheld from each paycheck, as well as considering ways to reduce their overall expenses.

In summary, high inflation in the United States has led to smaller tax refunds, leaving many Americans feeling financially strained. While the government is taking steps to address this issue, individuals can take proactive measures to manage their finances during this uncertain time.