Accountants weren’t the only ones cheering this year’s record number of tax returns.
This past Tuesday’s dreaded tax deadline actually marked a pleasant occasion for most filers. Of the 100 million or so returns processed through April 4, nearly 80% resulted in a refund averaging $2,792. The total sum paid out was about $5 billion, or 2.5%, higher than a year earlier.
That bodes well for the nation’s retailers in the months ahead since many households treat returns as a windfall to be spent, not saved. Even better, Uncle Sam has been a lot quicker to whip out his checkbook than in 2013. Had that not been the case, retail-sales figures for the past two months might have looked different.
Sales for March recorded their biggest month-over-month gain in a year and a half, according to a report Monday from the Commerce Department. That came despite the fact that Easter, which fell earlier last year, in March, isn’t until this Sunday.
“I do believe that [tax refunds] were fuel for the consumer in the month of March,” said Jack Kleinheinz, the National Retail Federation’s chief economist.
And, although the dollar amounts were smaller, the impact of accelerated returns probably did much to offset the impact of frigid weather in February. An initial estimate of retail sales was revised higher for that month. For the week ended Feb. 7, for example, cumulative tax returns were $12.5 billion, or a whopping 24%, higher than at the same point a year earlier. By the end of February, that gain had fallen to 8.8%, and by the end of March, the difference was just 2.6%.
Last year was an entirely different story. At the end of February 2013, refunds were 14.3% lower than at the same point in 2012. That was mainly the result of administrative delays caused by the “fiscal cliff” standoff in Washington. The effect on spending was exacerbated by the expiration of the payroll-tax holiday.
The drag on spending early last year was particularly strong at retailers dependent on lower-middle-class customers, such as Wal-Mart Stores Inc. and Dollar General Corp. , or service providers such as no-contract cellphone carriers.
It seems a fair bet that they had a far less taxing start to this year.