If you haven’t seen the H&R Block ads promising to help “get your billion back, America,” the idea is pretty simple. The tax-return preparation company wants to help people collect their fair share of what it says is $1 billion in unclaimed tax refunds. Sounds good, but the numbers don’t add up.
Let’s assume for now that the $1 billion number is correct. It doesn’t all go to one person. By H&R block’s own estimate, it goes to the 56 million people who do their own taxes. That works out to less than $18 per person. And this isn’t like a lottery where you might get more if the other winners don’t claim their share. You are only entitled to the amount you already overpaid, and you probably didn’t overpay by $1 billion.
There’s actually a much bigger problem with the notion that Americans pay $1 billion too much in taxes. It’s not true. We don’t overpay. We underpay, and by a lot more than $1 billion.
The last year for which the IRS has estimates is 2006, but the federal tax agency found that when you count up all the ways people underpay, such as not filing at all, underreporting their income, or not paying what they owe, the total underpayment is about $300 billion.
While one billion dollars may seem like a lot, it’s tiny when you’re talking about the funding needed to support Social Security, Medicare, defense, and other government programs. There are more than 300 million people in the United States. That $1 billion is just $3 per person, which couldn’t possibly be enough to provide essential support and services for everyone.
Large numbers often have this dizzying effect. It’s hard to conceive that a number as big as 1 billion is actually small in some context, but it is. So whenever you hear discussions of taxes and government spending, you need to be really careful to put the numbers in context. And when you see big numbers in a commercial, just beware.Evan Horowitz digs through data to find information that illuminates the policy issues facing Massachusetts and the US. He can be reached at firstname.lastname@example.org. Follow him on Twitter @GlobeHorowitz