Trump official says tax refunds will go out on time despite shutdown

With the government shutdown in its third week and concern mounting over a possible delay in tax refunds, a Trump administration official said Monday that taxpayers who are owed money will be paid on time.

Russell Vought, acting director of the White House budget office, said customary rules will be changed to make the payments possible. He told reporters Monday that an "indefinite appropriation" was available for the refunds, which would go out as normal.

The partial government shutdown couldn't have come at a worse time for the Internal Revenue Service. Tax-filing season opens soon, and while those who owe Uncle Sam will likely still have to pay up by April 15, people who were due money back have been worrying about a delay if the closure persists.

About three-quarters of taxpayers receive annual refunds, giving them an incentive to file their returns early. Many lower-income people count on refunds as their biggest cash infusion of the year. Refund checks averaged $2,899 last year. Within the first week of the 2018 filing season, more than 18.3 million people claimed about $12.6 billion in refunds.

The IRS said Monday evening the filing season, which typically begins at the end of January or early February, would start on Jan. 28 this year.

The IRS might recall a large number of furloughed employees to process returns—probably without pay—in accordance with its usual contingency plans. Still, hundreds of billions in refunds would likely still be delayed because funding wouldn't be available, under current rules.

Some experts question whether the Trump administration has the legal authority to reverse earlier policies to allow government money to flow into refunds during a shutdown.

The policy change removes a major political incentive for lawmakers and the White House to reach a deal in the coming weeks. If refunds won’t be held hostage, the shutdown effects will be felt much less widely, relieving some of the strain on Congress and Trump to resolve the current impasse over money for a wall on the Mexican border.

If people weren’t able to get refunds, there would be “excruciating pressure” on lawmakers to cut a deal, said Mark Everson, a former IRS commissioner. The calls congressional offices are receiving about the wall would morph into inquiries about why families haven’t received their refunds, he said.

Vought framed the move as part of President Donald Trump's goal to make the shutdown "as painless as possible."

The administration's announcement came as U.S. House Speaker Nancy Pelosi, now wielding majority control of the House, signaled her intention to begin passing individual bills to reopen federal agencies in the coming days—starting with the IRS' parent Treasury Department to ensure Americans receive their refunds.

Some Senate Republicans have been growing increasingly anxious about the extended shutdown and could support such legislation from the Democratic-led House.

With the White House announcement on refunds, "They're reversing a long-standing legal position," said Howard Gleckman, senior fellow and tax expert at the Urban Institute. But, he added wryly, "Who's going to sue? It would be hard to show damages. … So they might be able to get away with it."

A senior administration official cited a 2011 position of the chief counsel at the IRS that such payments are legally allowed during a shutdown.

The official spoke on condition of anonymity because they weren't authorized to speak publicly to reporters.

Republicans are under pressure this filing season to show taxpayers how they benefit under the new tax law. GOP leaders acknowledged they had lost the messaging battle about who benefits from the tax cuts ahead of the mid-term elections, but proponents of the law have said people will have more appreciation for it once they see how the overhaul affects them directly.

Nonpartisan tax experts have projected that the law will bring lower taxes for the great majority of Americans, though not all. According to the Tax Policy Center, a middle-income household should on average get a $930 tax cut for 2018, lifting its after-tax income by 1.6 percent.

Senator Doug Jones, an Alabama Democrat, said he thought the refund decision was a way for Republicans to get support for Trump’s insistence on border wall funding.

“It’s a band-aid to try to make people feel better about the fact that the government is not functioning,” Jones said.