Danielle DiMartino Booth, Columnist

The Economy Is Unprepared for a Drop in Tax Refunds

Don’t underestimate the negative impact of declining tax refunds on households.

April 12, 2019 at 11:00 AM UTC

Danielle DiMartino Booth, a former adviser to the president of the Dallas Fed, is the author of "Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America," and founder of Quill Intelligence.

The car market may be headed for a slowdown.
Photographer: Justin Sullivan/Getty Images North America

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Recent headlines touting a budding rebound in U.S. car sales should not be celebrated. The much lauded 17.5-million-unit figure reported for March auto sales was actually buoyed by fleet sales, which rose to a two-year high. Retail auto sales – a pure reflection of cars sold to individuals – fell 4 percent in March and by the same amount for the first quarter, according to Cox Automotive.

Even after accounting for seasonal factors such as which period had more selling days, the data paint a bleak picture of consumer spending, which isn’t likely to get any better given the trends we are seeing this tax season. Internal Revenue Service data show tax refunds are down 4.1 percent over 2018, and the strategists at UBS AG estimate refunds will be $25 billion lower than they’d initially estimated this year.