Californians Benefit From Refunds

Californians have been submitting their tax returns in recent days with many of the early returners looking forward to refunds. During the first 10 days of April, refunds on personal income taxes (PIT) totaled $1.1 billion. That compares with about $840 million a year ago.

When the State returns money to taxpayers, it is not a complete or permanent revenue loss. This is because refund recipients will turn around and often spend a significant share of their receipts on their homes or purchases for themselves and their families. This spending will both help drive California’s economy and come back fairly quickly in terms of higher retail sales taxes.

So far this month, for every three dollars of personal income tax payments the State has received, it has sent back more than one dollar in refunds. This is similar to the share sent back during the comparable period in 2013. For all of April, the share of refunds to gross PIT will be about half what it has been as fewer of the later filers receive money back. Last year, refunds were equal to 16.5% of gross PIT for the total month.  A similar experience is likely this year.