74% of people would rather receive a tax refund than a slightly larger check.

OffshoreDrilling

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Since I’m now a shitty Prius owning car enthusiast, I’m going to try and contribute more on other things I’m interested in.


https://decisiondata.org/news/74-of-people-would-rather-receive-a-tax-refund-than-a-slightly-larger-paycheck/

April 9th, 2019
We generally like to think of our team here at Decision Data as rational. But even as data scientists and people who love to play armchair behavioral economists, we simply cannot resist the appeal of a tax return.
All the reasoning and logic in the world about how it's better to pay the correct amount in taxes every paycheck and keep more of your money upfront doesn't help the fact that it's simply awesome to get a “bonus” every April, even if it is our own money. It's the large scale equivalent of finding $20 in a coat pocket.
Giving the government a free loan for 11 months? Doesn't matter, it's still nice to get that sweet, sweet refund.
We wanted to see how common this was, so we ran a research survey to get some numbers.
Methodology: We took a survey of 1,251 US citizens to get a feel for how many people prefer getting a tax refund to collecting a slightly larger paycheck. We tested several versions of the question until we landed on one that seemed to avoid suggestion.
“If the total amount of money you receive is the same in a given year, do you prefer getting a tax refund, or do you prefer a slightly larger paycheck?” turned out to be the best version of the question after running several experiments.
Below you can see the results:
A Tax Refund A Larger Paycheck Not Sure
Do you prefer: 74% 21% 5%

The idea for this survey came from the recent upheaval regarding the 2018 tax season. US taxpayers are seeing lower refunds and as both The Washington Post and New York Times point out, this should be viewed as a win for the individual. Paying less taxes on every check and then not getting a refund means more of your take home pay is immediately available to you. Not to mention the irrationality of handing out a free loan to the United States should not be cause for joy that many feel when they get their refund.
But even as we spoke with several survey respondents who voted that they prefer a tax refund, no amount of explaining changed their mind. People simply prefer the “bonus” feel of a tax refund.
The average tax refund in 2018 was approximately $2,700. If this amount was properly un-taxed over the course of a year, this would be about $100 extra on every paycheck. We can see the appeal of a one-time payout of $2,700 having a shininess factor over $100 on each bi-weekly paycheck.
People tend to take their tax refunds as windfall, typically paying a bill or debt, saving a large portion of it, or maybe buying something on their wish list. It's easier to do so with one lump sum than it is to do so with a small amount saved up over the course of a year.
 

BADAZZTEALCOBRA

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Well we know [MENTION=4873]GLADIATOR[/MENTION] is one of those 74%. :s00ls:


I would rather be at zero, I get nothing back and only gave them exactly what I needed and the rest was on my paycheck...


I actually like the idea i think [MENTION=5001]Ryan02Stang[/MENTION] brought up that we should just have nothing taken out all year, then at the start of a new year they can say what we owe and then pay it off by April....


I think more people would want a more fiscally conservative government if it was done this way instead of a little bit each week out of your check. If everyone all of a sudden had to write a check to the US Treasury for $6,000, they would want to know where the fuck the money is going.



At least that would be my hope. :dunno:
 

SMRTSS1

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Bills are due every month, not once a year. People who get mad about not getting a big return are pissed about bad math and if you do it right it’s a push and you get zero back and owe zero instead of giving out an interest free loan to the gubment. The only money I got back this year was the extra I put in just in case we made a mistake in our filings with our kid.
 

N20GT

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Based on all the nonsense in the news regarding lower tax returns, this doesn't surprise me at all. People are morons

Bet less than 5% of the population could accurately tell you what the time value of money is, and <1% could actually calculate it based on current interest rates
 

N20GT

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One couple I knew would get $5-7k back every year...think about that. $4-600/month they were giving up.

And they were happy about it

Fucking idiots
 

1quick

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Guys I work with claim 0 just to get back big checks at the end of the year, That’s cool give the government an interest free loan all year
 

OffshoreDrilling

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From a purely technical analysis, it absolutely makes sense to me to have as little taken out as possible. I do enjoy having that minor windfall when it does come though because it’s money unaccounted for in my budget.

Think about it in a couple other ways:

What if you got a raise that amounted to $2700/yr. Would you rather it come as a one time lump for that year or have it added to your salary on your regular pay schedule?

What if you cut out grabbing a coffee and bagel on the way into work or a fast food lunch? Would the $10.78 you saved for 5 days a week make a difference knowing you saved $2700 this year?


I think the right answer for me would be somewhere between a perfect withholding and way over paying. I’ve never had a $2700 return which they claim is average. $400-1200 is typical for my personal situation. That’s enough for a frugal vacation, knocking off the balance on a card, a worthwhile savings contribution or a major purchase toward a hobby.
 

1quick

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I’m a little conservative on my tax return because I don’t want to owe in the spring I have other expenses that I budget for, and it’s hard to nail down how much I’m going to make since we get a raise every year and if someone quits, the overtime could be 10-20k over normal
 

EmersonHart13

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It makes sense to break even. Thats what I shoot for and you should too. Take that extra hundred and invest it or save it so you can make interest.
 

b4black

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I like the 5% not sure. What is there to not be sure about?




But then you could ask anything (Are you a alive?) and get 5% unsure.
 

N20GT

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I see no problem with owing, the penalties aren't bad. I owe over $6k this year and the penalty was only $94....or about 1.4%. I'll take it
 

1quick

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Wait they charge you a penalty for owing taxes before the deadline?
 

1quick

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What about the people that don’t have taxes taken out and just pay them at the end of the year, I didn’t think you got penalties for that
 

N20GT

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What about the people that don’t have taxes taken out and just pay them at the end of the year, I didn’t think you got penalties for that
Yes you do. I was 1099'd for about 3 years and always sent in way less in estimated payments than I should have throughout the year, and paid penalties every year as a result. Again though, they're small

I haven't had a tax return since I was a teenager, lol.
 

1quick

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I suppose if you invest the money you would be paying you should make more than 100 bucks off of it in a year
 

Ryan02Stang

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We have all these silly classes in high school that add barely any value to real life unless you're maybe an engineer (thank God I spent 4 months of my life learning and applying the Pythagorean theorem!). Even more worthless classes in college if you go that route (at least 30 credit hours of absolute bullshit that has zero to do with your major). But no where in there are there requirements regarding things like understanding interest, loans, net present value, future present value, etc.

This is why we end up with 74% of people who are financially brain dead and think its better to get a big "return" rather than a larger paycheck. And before anyone says "well I can't save and I like that windfall of cash"....just setup a separate account and have a portion of your paycheck auto-deposited into that account and leave it alone.
 

OffshoreDrilling

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You guys have to account for the average person. What percentage of the population has financial literacy beyond knowing that debt is bad and you should save money? Investing or saving that small dollar amount is a foregone thought for them.
 

Sprayin

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We have all these silly classes in high school that add barely any value to real life unless you're maybe an engineer (thank God I spent 4 months of my life learning and applying the Pythagorean theorem!). Even more worthless classes in college if you go that route (at least 30 credit hours of absolute bullshit that has zero to do with your major). But no where in there are there requirements regarding things like understanding interest, loans, net present value, future present value, etc.

This is why we end up with 74% of people who are financially brain dead and think its better to get a big "return" rather than a larger paycheck. And before anyone says "well I can't save and I like that windfall of cash"....just setup a separate account and have a portion of your paycheck auto-deposited into that account and leave it alone.
If you don't realize that literally everything you said we "didn't learn" is covered in Algebra, then maybe you should have paid more attention in high school.

And Pythagoream Theorem? That was like 7th grade.
 

OffshoreDrilling

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We have all these silly classes in high school that add barely any value to real life unless you're maybe an engineer (thank God I spent 4 months of my life learning and applying the Pythagorean theorem!). Even more worthless classes in college if you go that route (at least 30 credit hours of absolute bullshit that has zero to do with your major). But no where in there are there requirements regarding things like understanding interest, loans, net present value, future present value, etc.

This is why we end up with 74% of people who are financially brain dead and think its better to get a big "return" rather than a larger paycheck. And before anyone says "well I can't save and I like that windfall of cash"....just setup a separate account and have a portion of your paycheck auto-deposited into that account and leave it alone.

Reminded me of this meme :bowrofl:

 

Sprayin

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Again. I know it's a meme but recorders were in 4th maybe 5th grade. If you're playing a recorder in High School then you probably are actually retarded.
 

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