More Americans Saving Tax Refunds

Here is some good news for the future of our society.  Yahoo! Finance reports that more Americans are planning to save at least part of their tax refunds than did so in the past nine years.  Others plan to use their refund to pay down debt.  Less than one-quarter expects to use it on splurge spending or a vacation.  Another survey mentioned in the article found similar results.

People have been known to give one answer to a survey and act differently (see blog from October 7, 2011), but if this one turns out to be true, perhaps fewer people would be living on the edge, paycheck to paycheck, in danger of default.  It’s good news not only for them, but for everyone.

Economic understanding about the flow of money tells us that when people are unable (or unwilling) to pay their legitimate debts - credit cards, auto loans, mortgages, or whatever - the rest of us must take up the slack.  Banks adjust interest rates, penalties, fees and their willingness to approve loans to make up for the added risk posed by these deadbeats.  The same reasoning applies to tax evaders who settle for “pennies on the dollar” or, for that matter, to shoplifters.  Those losses don’t go away or come out of some mysterious pot of money or some magic insurance policy with no premiums.  They are made up for out of your pocket and mine in the form of higher prices, premiums, taxes and fees.

So this expected increase in responsible behavior from some is good news for all.  (This example shows how more positive behavior by individuals in any of the five key dimensions moves America as a whole in the right direction.)