Tax Refund Season Is Paying Dividends to City’s Retailers

City retailers are already benefiting from the tax refund season, as New Yorkers receive billions of dollars in federal, state and local tax refunds. Because the Internal Revenue Service estimated that more than 50% of personal income-tax returns this year will be filed electronically – drastically cutting down on processing time – many of those returns have already been sent.At Sherry-Lehmann Wine and Spirits on Madison Avenue, tax refunds have been fueling the sale of cases of French Bordeaux and a spectrum of California red wines, the store’s vice president, Chris Adams, said. “Where we have seen the spike is with our customers expanding the purchase from a case of newer Bordeaux to a better vintage, or from a single bottle to three bottles. That wasn’t happening in February.“We’re not seeing what we see at Wall Street bonus time, where several thousand dollars can be spent at once,” Mr. Evans said, but rather “a classic increase in sales volume.”An electronics salesman at the newly opened Best Buy store at 622 Broadway, who asked not to be identified due to company policy, told The New York Sun that three of his customers over the past week said that their purchases had been motivated by tax refunds. “One guy bought a 30-inch flat panel that we sell for $1,300, and the other two bought a couple of DVD players each,” he said.Higher-end jewelry is selling well at Objets Du Desir, a trendy boutique in SoHo, according to its owner, Soledad Lowe. “We’ve definitely seen an increase this month. People are buying more expensive pieces,” she said. In February, her customers were thinking about pieces that were $100 or $150. Now, with some sudden cash, “If it’s $600, it’s no problem,” she said.In terms of bang for the tax refund buck, the earned-income tax credit probably does more for the city’s low-income neighborhoods than any other government tax refund or rebate, a Manhattan Institute tax and fiscal policy scholar, E.J. McMahon, said. He estimated that EITC payments to city residents might reach the hundreds of millions annually. The EITC is a payment given by the government to ensure that working families with children, which have no federal tax obligation, do not drop below the federal poverty level. Payments top out at $2,604 and $4,280, depending on the number of children the family has. New York State also has an EITC that provides families 15% of the federal payment.Although it is difficult to know precisely how much money will be refunded to the city’s taxpayers, the number will run easily into the billions. City Comptroller William Thompson Jr. is estimating that personal income-tax refunds from city taxes will be $857 million this year, a 5% increase from last year’s $816 million. City businesses are due for a fiscal shot in the arm as well, with Mr. Thompson estimating that $416 million will be returned, a 16.6% increase versus last year’s $346.2 million.Tax refunds from New York State, according to a Department of Taxation and Finance spokesman, are not tracked as closely as payments, but he acknowledged that an educated guess could be made based on the fact that the city traditionally accounts for about 40% of the state’s personal income-tax receipts. Using the 40% guideline, $648 million would be refunded to city residents if the scheduled $1.62 billion is paid out in statewide returns.Federal personal income-tax refund levels have not yet been analyzed by geographic area, an Internal Revenue Service spokesman said, but both the volume and amount of refunds are ahead of last year. The average refund, now $2,436, is $200 higher than last year, the IRS said in a press release. A slew of tax changes, including the introduction of deductions for some state sales taxes and a higher deduction allowance for college tuition and fees, are responsible for the higher refunds.The secretary of the Treasury, John Snow, called yesterday for making the 2001 tax cuts permanent. In a statement, Mr. Snow said 110 million Americans would see their taxes decline by an average of $1,716, and 5 million people would have their tax obligations eliminated. In a nod to the growing political clout of the so-called investor class, Mr. Snow said 24 million investors would save an average of $947 from lower capital gains and dividend rates.There are still big problems with the tax code, regardless of the increase in tax refunds, the director of the New York City Independent Budget Office, Ronnie Lowenstein, said. The primary culprit, she said, is the alternative minimum tax, which cost city taxpayers an estimated $700 million last year. The AMT is a parallel tax that disallows numerous medical and other write-offs, and that has to be calculated alongside the regular tax, with a filer responsible for whichever value is higher. Because it is not indexed to inflation, more and more middle-income people are being subjected to a tax that was originally designed to ensure that the wealthy were not able to claim so many deductions that they had no tax bill.The Treasury Department estimated that in 2005, 14.7% of the taxpayers earning between $75,000 and $100,000 would pay the AMT, up from 2.3% in 2000.The IBO said in a release that 50% of all city taxpayers earning between $50,000 and $125,000 – 479,000 people – will be forced to pay the tax by 2010.

Tax Refund Season Is Paying Dividends to City’s Retailers

Tax Refund Season Is Paying Dividends to City’s Retailers

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