Sunday, December 02, 2007

Another Blow To the U.S. Economy - Expected Delays For Tax Refunds

How many blows can the U.S. economy take before a full fledged recession occurs? First gasoline prices skyrocketed, followed by a housing bust, then a credit crisis, followed by liquidity issues that caused staggering losses at financial institutions, and recent declining earnings reports have not been received well by the stock market. To date, however, the U.S. economy has been pretty resilient.

The work on freezing some interest rates on subprime loans appears to be helping. While retail sales have been weak, it has not been a complete disaster yet. So consumer spending is still providing some support. However, it looks like a new issue with tax refunds may further weaken consumer spending and credit. In an article I read in Yahoo! Finance titled Millions of Tax Refunds Could Be Delayed , Jim Abrams writes that the inability of Congress to pass the tax bill could move the start of the tax filing season to as late as mid-February, delaying up to 31.8 million refunds for a total of $86.9 billion.

Since many tax filers count on their refunds to cover necessary expenses, it seems to me that a delay would be still another factor that pushes the economy closer towards recession.

For more on New Beginnings, check back every Sunday for a new segment.

Photo Credit:, Ronnie Bergeron

This is not financial or tax advice. Please consult a professional advisor.

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