States to Delay Tax Refunds

States to Delay Tax Refunds
In place of their state tax refund, many Americans may find themselves holding a government IOU as states struggle to meet budget shortfall. USA Today reports http://www.usatoday.com/news/nation/2010-03-11-tax-refunds_N.htm?csp=34, "The recession has tied up cash and caused officials in half a dozen states to consider freezing refunds, in one case for as long as five months," thus forcing citizens into providing de facto zero-interest loans to their states. New York, for example, may delay $500 million in taxpayer refunds as it faces a $9 billion deficit. In the Aloha State, Hawaiians may have to wait until the end of August to see their refunds.
According to Scott Pattison, executive director of the National Association of State Budget Officers, the prospect of delayed refunds is "an indicator of how bad [the economy] is. You know things are bad when you have to do that."
Of course, the luxury to postpone payments doesn't apply equally. For taxpayers, late tax payments mean penalties, interest and potentially even wage garnishment, property confiscation and visits to car washes. But when the IRS is late refunding to Americans the money they overpaid, repercussions might include interest on the late refunds -- interest paid with taxpayer dollars. Something is very wrong with this picture.