Capitol Report: January’s retail sales figures disappointed, and tax cuts won’t rescue February, either

Tax cuts won’t fill up retail cash registers just yet.

The tax cuts may have arrived in many Americans bank accounts, courtesy of lower withholding, but it still will be some time before those reductions goose retail spending.

That’s because of another law, enacted in 2015, that delays refunds associated with the Earned Income Tax Credit.

That legislation, the “Protecting Americans from Tax Hikes Act,” ostensibly was designed to combat identity theft. But it affects millions of Americans — up to 30 million households — and the Internal Revenue Service says most refunds from the EITC and the Additional Child Tax Credit won’t be available in customer accounts until Feb. 27.

According to research from Goldman Sachs, the EITC-related delays are larger in size, at over $15 billion, than the tax cuts to consumer and pass-through income, which amount to between $8 billion and $12 billion.

What’s worse, from an economic perspective, is that the households that receive the tax credit have a higher propensity to spend, because they’re poorer.

That’s a long way of saying, after January’s retail sales disappointment, February’s numbers might not be wonderful either.

In the end, taxpayers will get their refunds as well as their tax cuts, and Goldman Sachs estimates real consumption growth, on an annualized basis, of 2.8% in the first quarter and the first half of the year.

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