U.S. Tax Refunds Plunge 17% as Treasury Ratchets Up Defense

Uncertainty about refunds and smaller checks could weaken consumer spending as taxpayers grow more cautious. U.S. retail sales unexpectedly fell in December, marking the worst drop in nine years, according to Commerce Department data.

The Treasury has defended the drop in tax-refund checks, which some are interpreting as a higher tax liability, rather than income distributed over 12 months. The agency released the data on Friday night instead of during the day.

As Democrats lay the foundation of their bid to unseat Trump in 2020, raising taxes on the wealthy is emerging as a central theme.

Republicans have joined Treasury Secretary Steven Mnuchin in the public relations battle about the tax law, with Senator Chuck Grassley and Representative Kevin Brady, who led the legislative efforts, earlier this week saying that "the size of your tax refund has nothing to do with your overall tax bill. It merely reflects what you overpaid the IRS in your paychecks last year."

The Government Accountability Office estimated that 21 percent of taxpayers would owe money at filing time under the new law, compared with 18 percent under the previous law, because of the changes in the way withholding is calculated.