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IRS – Refund?

There is one news snippet that is catching the attention of many across the U.S. The IRS will not have enough money to pay for tax refunds. That’s what people hear.

First, it’s the Treasury, not the IRS that is responsible for issuing checks. What Treasury Secretary Jack Lew told Congress is that they need to raise the debt limit for monies to be available. Here’s the irony. If businesses or families cannot make ends meet, they are accountable and in the end, they go out of business or declare bankruptcy.

Our government, which has been extracting dollars during the prior calendar year is now indicating that we need to raise the debt ceiling. So where’s the extracted money? Great question.

The national debt went over $17 trillion in the fall and now is over $17.3 trillion. There’s a dilemma. Do we tighten our belts and cut some costs or raise the debt ceiling? Here’s my prediction. Both parties will ‘work together in bi-partisan support’ and raise the debt ceiling. Forget the argument that injecting these hundreds of billions of refunds will energize the economy. Velocity of money generating additional tax revenues will have little effect on the big picture.

We’re spending more than we take in, our debt is out of control and there is little on the horizon to indicate any positive long-term shift is a part of our immediate future.

So, was what we heard on the news actually true? Not this year. But probably sooner than you think.

Mark Schuster, Partner

February 5, 2014

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