Tag Archives: EITC

Public Subsidies of Low Wages

publicbenefitsNew Orleans      The Berkeley Center for Labor Research and Education at the University of California has released a report looking at many federal and state subsidies directed at relief for lower income Americans.  All good.  What they found though is that a huge percentage of this kind of support is not in Republican ideological terms, helping people get their lives together to get jobs, but is in fact subsidizing the low wages of existing work.  In the words of the chair of the center, our old comrade Ken Jacobs, “This is a hidden cost of low-wage work.”

The Center’s new report defined a working family as any family that included a worker averaging at least 27 hours of work weekly.  Under that definition, looking at the statistics that were available to them, almost 75% of the people helped by federal programs like food stamps, EITC, and Medicaid are headed by workers.  Based on their calculations the cost of such public support for working families was over $152 billion per year.  Working families were the biggest beneficiaries of federal programs aimed at the poor in all but six states.  Make a mental note or jot this down on a piece of paper nearby:  this does not include anything involving health care support based on the Affordable Care Act because no figures were available yet for such calculations.

Don’t misinterpret these figures.  I’m 100% for what I call “maximum eligible participation” as a key ingredient for “citizen wealth.”  In fact I think we need to redouble our efforts to make sure all families that are eligible for any of these programs are in fact receiving the benefits.  That’s what they are for, so we should make them work.

Where the rubber hits the road on welfare versus work is that the ideological drift since President Clinton has shifted most federal and state support towards workers and away from providing the underpinnings for the poor that would platform their ability to build stable lives, and, yes, even access more education and work.  There is only so much money and so many ways to slice the pie though, so instead lawmakers have retreated from attacking poverty and moved instead towards subsidizing lower wage work as we have increasingly become a service-based, lower waged economy over the last generation.

The inescapable argument of the Berkeley report is that if employers were paying fair wages, less subsidy would be required. At one level the report is feeding into the right ideology that maybe there is something wrong with workers getting food stamps, EITC and other support.   At one level the report is feeding into the right ideology that says we should support lower waged work and that maybe there is something wrong with workers getting food stamps, EITC and other support.  That is not their theme and is inadvertent, but that’s the cloud that hangs over a figure like $152 billion, as more red states will claim they should cut back support to workers, as we have seen recently with the retraction of support for providing food stamps for many men without dependent children.  Every dollar of that money is well spent, and more should be spent in fact, but as long as we are publicly subsidizing low wages, we are not able to provide more critical support to the lowest income families to pull them out of poverty, and that’s worse than a shame.


Tax Preparers Refund Anticipation Loans are Out of Control – Again!

AP_Tax_Refund_Advances_t_w600_h3000New Orleans         After years of campaigns by ACORN and agreements with the major tax preparers, H&R Block, Jackson-Hewitt, and Liberty Tax Services, to rein in the abuses and predatory pricing of “refund anticipation loans” or RALs, as they are known in the industry, it appears that the rats will play “while the cat is away.”  Nina Olson, the IRS’ national taxpayer advocate was quoted in an AP story calling the situation now the “wild, Wild West” and “called the level of risk for abuse in pricing and quality of service unprecedented.”  What the heck?!?

It seemed just yesterday that the tide was going the other way and that the earlier ACORN victories were being to be set in concrete.  The IRS had announced that they were promulgating rules to restrict the use of RALs – finally.  The IRS was finally going to create some rules of the road, including licensing at some level or something to assure a degree of competency by tax preparers.  Major banks like HSBC and others had refused to continue to offer the lines of credit to the preparers for such products for “reputational” reasons.  The Consumer Financial Protection Bureau had announced that it was on the case as well and strict rules were coming.   And, now it’s the wild West?

Refund anticipation have soared 17% to 21.6 million taxpayers in 2014 compared to 2011 according to IRS data given to the Associated Press.  Worse the big prep companies are hooked on this drug.  RALs and prepaid cards loaded with anticipation refunds make up 10% of H&R Block’s gross sales now, and the even more bottom feeding, Liberty Tax Services, is sucking up 20% of its revenues through such pure and simple exploitation.

Drive through any low-and-moderate income area and the tax payers are housed cheek to jowl along the main thoroughfares.  When you see the young people dressed in atrociously green Statute of Liberty costumes dancing with arrow signs to lure you into fast service at a Liberty storefront, don’t laugh, because the bait is luring victims into the trap.  Make no mistake about where the predators are feeding.  The IRS data reveals that “about half the purchasers are EITC recipients.”  The Earned Income Tax Credit touted by Presidents of both parties as their major anti-poverty program for low income, working families is only available for such families as a way to get ahead and survive, but those are the pockets being picked.  Of all victims of these high interest loans charging usurious rates between 250 and 400%, 84% are low-income.  There’s no question about what’s going on here.

The IRS is whining because they lost a court appeal on their licensing effort for tax preparers, but what happened to their efforts to rein in the RALS.  They have tools a plenty.  The Consumer Financial Protection Bureau now claims they are close to having something written up, but their scope seems limited to more transparency, and looks good, but has little practical impact on the predation.  ACORN got all of the companies to make posters with the rates that preparers would show at their desks and on their computer screens, but that was just the toll people had to pay to get on the faster highway to get their money.

The IRS and other agencies of government are essentially allowing an income transfer from the federal government intended for lower income families to become a direct remittance to private companies’ bank accounts, because they are unwilling to either put their foot down on the practice or step up and move all or part of the refunds to families more quickly themselves or through preferential preparation sites.

This ought to be a scandal, and, if intent counted, it’s a crime.  Without a doubt it’s a government approved swindle.


Street Dogs – Unions and the Law (Alt Version)