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Could it benefit the government somehow if income tax refunds paid interest?

Update:

What does the government do with the quarterly tax payments it receives from employers? How would paying intererst on refunds be different from selling bonds and T-notes?

12 Answers

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  • Amy
    Lv 7
    10 months ago
    Favourite answer

    Unlikely.

    Paying interest would convince a few more people to overpay their taxes and get refunds (it would negate the argument that you'll see a lot of in this forum, "never give the government an interest-free loan"). However I doubt that most people would change their behavior or even know about the policy change.

    So the government will have a little extra money during the year, replacing money it would have borrowed in other ways. In order for this setup to benefit the government, the total interest paid on ALL tax refunds - including those that are currently paying 0% - would have to be less than the interest paid on the relatively small amount of DIFFERENCE in treasury bonds.

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  • 10 months ago

    No, it would cost them money.

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  • 10 months ago

    Only if they paid very low interest, which might encourage people to overpay tax deductions, yet it would cost the government less than the interest paid on the National Debt.

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  • 10 months ago

    If you were smart, you wouldn't give the government the interest free loan in the first place...

    You do realize and interest would come from the same source...so from the same refunds.

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  • Anonymous
    10 months ago

    Most people who get refunds every year should change their withholding so they would get little or no refund at the end of the year.

    However, for many, tax refund time is the only time they ever get their hands on a large chunk.

    They are generally financially unsophisticated. And the number of them who pay high rates for refund anticipation loans is bothersome.

    Paying interest would cost the government money so it would make little sense.

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  • Pearl
    Lv 7
    10 months ago

    its possible it could

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  • 10 months ago

    No..But it would be nice for us!

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  • 10 months ago

    How? They already got my money and would just increase taxes to cover the refunds!

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  • 10 months ago

    It would cost the government money. Some refunds now draw interest.

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  • 10 months ago

    No. It would cost the government money.

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