Taxman Returns

Dollars from heaven

'Tis the season for income tax refunds. Early-bird filers are being rewarded these days by the arrival of pretty, green U.S. Treasury checks in the usual sea of junk mail. This year the pleasure is unusually exquisite: more people than ever are getting refunds. By midyear an estimated 75% of U.S. taxpayers will receive an average of $610 back from Uncle Sam. This is up from last year's $510 rebate. Reason: each personal exemption is now worth $1,000, up from $750.

Millions of Americans declare fewer exemptions on payroll deductions than they are entitled to and thus pay too much in taxes all year long. They view overwithholding as a form of painless forced saving by Uncle Sam. This year's exemption increase has exaggerated the effect. But those dollars were worth 13.3% less because of inflation, and the taxpayers have forgone perhaps an additional 10% or so interest in a money market fund.

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