Yesterday’s post ended with an allusion to the “Hidden Welfare State” and the world of tax expenditures. Households across all income categories are the beneficiaries of government assistance programs, and the oft-reported 49 percent who receive some type of government benefit is true only in a narrow sense. So, in the end, how many of us actually receive government benefits?
Last week’s release of the now infamous Mother Jones video of Romney’s comments on the “47 percent” of Americans who don’t pay income taxes has everyone talking about the U.S. tax system. Despite this election cycle’s relative dearth of substantive, detailed policy discourse, the campaigns and the media have indeed provided the public with a lot of useful information on the way taxes work in this country. The terms “Capital Gains” and “carried interest” have entered the common vernacular and it seems that everyone now knows about the “Buffet Rule” and the tax rates for certain types of income.
If any good has come out of Romney’s comments on the “47 percent,” it is that the public now has a better understanding of those folks who have been labeled by some on the right as “lucky duckies.” The left has been quick to argue that these lucky duckies are actually not so lucky; and by now many of us have seen or heard the statistics complied by the non-partisan Tax Policy Center: Continue reading
This year marks the end of bank-provided tax refund anticipation loans. Refund anticipation loans (RALs) are short-term loans with high interest and fees that are based on a filer’s expected tax refund (minus tax preparation fees, loan fees, and interest). RALs provide access to tax refund money about 7-9 days earlier than if the filer received a direct deposit from the IRS.
Like other short-term, high-cost loans, RALs can pose serious threats to the economic well-being of individuals and families. Of concern to both policy makers and the broader public is that RALs undermine tax assistance for the working poor. In Virginia in 2008, 7 percent of Virginians receiving tax refunds (nearly 200,000 filers) requested RALs. Nearly two-thirds of RAL applicants received the Earned Income Tax Credit (EITC), a federal anti-poverty program targeted at low-income households that work. Chi Chi Wu and Jean Ann Fox of the National Consumer Law Center estimate that nationwide RALs drained $255 million from the federal EITC program in 2010.