The damage the government is doing to lower income taxpayers

[LdiJ]

What is the name of your state (only U.S. law)? This applies to all states

I do not think that the congress or the executive office has the slightest clue just how much damage they have done to low income taxpayers.

The first problem, which of course is the fault of the taxpayers, is that they have overspent on Christmas and expect the make up their shortfalls with their tax return. They expect to be able to file ASAP (the IRS has just announced that they will not except tax returns until January 30th (instead of the normal 2 weeks or so earlier) they expect to be able to obtain refund anticipation loans (gone completely this year thanks to the federal government) and in a worst case scenario they expect to be able to get their refunds in 8-14 days. (not this year, the IRS is going to be reviewing a lot more tax returns and a substantial number of them will have to wait 21 days or more to get their refunds).

On top of that, all of their paychecks are also smaller because they are now back to full social security tax being withheld.

So, people who had hoped to cover past due December bills and current January bills with their refunds in January, may not even have the money early enough for it to be of any help in February. We are going to see tons of evictions, utilities getting shut off, people losing their jobs because they cannot get car repairs done, etc., etc., etc.

There are also other families who won't even be able to file until mid-february/early march. People may have made different financial decisions has they known that so many things were going to be different all at the same time. I feel very sorry for these people and I think it just demonstrates how far removed our federal government is from the "little guy".

 

[Ohiogal]

What is the name of your state (only U.S. law)? This applies to all states

I do not think that the congress or the executive office has the slightest clue just how much damage they have done to low income taxpayers.

The first problem, which of course is the fault of the taxpayers, is that they have overspent on Christmas and expect the make up their shortfalls with their tax return. They expect to be able to file ASAP (the IRS has just announced that they will not except tax returns until January 30th (instead of the normal 2 weeks or so earlier) they expect to be able to obtain refund anticipation loans (gone completely this year thanks to the federal government) and in a worst case scenario they expect to be able to get their refunds in 8-14 days. (not this year, the IRS is going to be reviewing a lot more tax returns and a substantial number of them will have to wait 21 days or more to get their refunds).

On top of that, all of their paychecks are also smaller because they are now back to full social security tax being withheld.

So, people who had hoped to cover past due December bills and current January bills with their refunds in January, may not even have the money early enough for it to be of any help in February. We are going to see tons of evictions, utilities getting shut off, people losing their jobs because they cannot get car repairs done, etc., etc., etc.

There are also other families who won't even be able to file until mid-february/early march. People may have made different financial decisions has they known that so many things were going to be different all at the same time. I feel very sorry for these people and I think it just demonstrates how far removed our federal government is from the "little guy".

Maybe they should have budgeted and not overspent on Christmas with the hopes that this would bail them out.

 

[Zigner]

Maybe they should have budgeted and not overspent on Christmas with the hopes that this would bail them out.

You make a good point. Up until just before the new year, there was no guarantee that things weren't going to be much worse than they turned out being.

 

[FlyingRon]

The dunderheads in congress don't understand the damage they are doing to the ENTIRE country. The previous congress has even exceeded even the 80th congress (1946-47, generally referred to as "The Do-Nothing Congress") in the least amount accomplished during their term. Not only is the entire economy, rich, poor, middle-class on the verge of tanking again, but the operation of just about ever federal interest is in grave jeopardy. Since sequestration loomed almost every agency has gone into CYA mode not spending anything out of fear of criminal liability under the anti-deficiency act.

Now did you have a question, or did you just want to rant. Rants go in the other forum.

 

[tranquility]

What is the name of your state (only U.S. law)? This applies to all states

I do not think that the congress or the executive office has the slightest clue just how much damage they have done to low income taxpayers.

The first problem, which of course is the fault of the taxpayers, is that they have overspent on Christmas and expect the make up their shortfalls with their tax return. They expect to be able to file ASAP (the IRS has just announced that they will not except tax returns until January 30th (instead of the normal 2 weeks or so earlier) they expect to be able to obtain refund anticipation loans (gone completely this year thanks to the federal government) and in a worst case scenario they expect to be able to get their refunds in 8-14 days. (not this year, the IRS is going to be reviewing a lot more tax returns and a substantial number of them will have to wait 21 days or more to get their refunds).

On top of that, all of their paychecks are also smaller because they are now back to full social security tax being withheld.

So, people who had hoped to cover past due December bills and current January bills with their refunds in January, may not even have the money early enough for it to be of any help in February. We are going to see tons of evictions, utilities getting shut off, people losing their jobs because they cannot get car repairs done, etc., etc., etc.

There are also other families who won't even be able to file until mid-february/early march. People may have made different financial decisions has they known that so many things were going to be different all at the same time. I feel very sorry for these people and I think it just demonstrates how far removed our federal government is from the "little guy".

At least the IRS is clear for the end of January. If the AMT "fix" was not included in the bill, they were talking about not e-filing acceptance until MARCH! (The IRS programmed the computers with the theory the AMT was going to be changed, if it wasn't, the would have had to reprogram.)

 

[xylene]

Refund anticipation loans are usurious predatory lending, a dreadful scam to exploit the poor and bilk taxpayers. It was an abusive gimmick to line big accounting's pockets with a huge cut of EITC money that was meant for low income wage earners.

The temporary reduction in payroll taxes was a mistake. It harmed the budget, didn't stimulate the economy to nearly the amount promised and allowed employers to not keep up with inflation proportionate wage increases, since the government was offsetting that amount.

Since 2008 and the great recession, every major news outlet has been brimming with stories about people simplifying and doing more with less. And yet Christmas consumerism is some kind of patriotic duty. Talk about economic schizophrenia.

 

[Ohiogal]

You make a good point. Up until just before the new year, there was no guarantee that things weren't going to be much worse than they turned out being.

All the news talked about during December was the fiscal cliff. People who overspent with the hopes that the world would bail them out -- yeah not the way to go. And quite frankly I don't think it is the government that is doing anything to lower income people. If the lower income people racked up their debts to splurge on big screen televisions and other things to spoil the kids -- that was a bad choice on their part. Christmas can be done cheaply without going into megadebt. I do it every year.

 

[LdiJ]

All the news talked about during December was the fiscal cliff. People who overspent with the hopes that the world would bail them out -- yeah not the way to go. And quite frankly I don't think it is the government that is doing anything to lower income people. If the lower income people racked up their debts to splurge on big screen televisions and other things to spoil the kids -- that was a bad choice on their part. Christmas can be done cheaply without going into megadebt. I do it every year.

How about people who simply want to spend 200 - 300 dollars buying a Christmas tree, a few gifts for their children, and having a good Christmas dinner, who then have to delay their rent or some of their other bills. However about these people who have their cars running on a shoestring because they are accustomed to having the money available in January to do more permanent repairs.

Its all good and well to assume that the people who are suffering spent their money on luxuries...however the reality of things is that very few of them did.

I realize that people here have very little compassion for the working poor...but I didn't expect it to be quite this obvious.

 

[tranquility]

All the news talked about during December was the fiscal cliff. People who overspent with the hopes that the world would bail them out -- yeah not the way to go. And quite frankly I don't think it is the government that is doing anything to lower income people. If the lower income people racked up their debts to splurge on big screen televisions and other things to spoil the kids -- that was a bad choice on their part. Christmas can be done cheaply without going into megadebt. I do it every year.

While, at the end of the day, I believe in personal responsibility and accept there will be pain to those who do not practice it--let me add that there will always be some segment of the population that needs to be taken care of.

Ohiogal can write. She has a job. I bet she understands germ theory. (In that there are nasties everywhere and you should wash your hands.)

Some are not so "lucky". I know my clients are different from LdiJ's. I don't have a lot of fighting over kids as a deduction and EITC is not a necessary item when it is on a tax return I prepare. (It makes you shake your head when a rich person who, due to good tax planning has so little earned income they get welfare from the Feds.) We never offered RALs and besides, our clients are financially secure and sophisticated enough to not need/want them anyway. But, I've seen poverty. I've seen the desperate look of a person counting their change to see if they can afford a hamburger. I've talked with those struggling to make ends meet when I take a few hours of my season-limited time and volunteer to do their tax returns and hear (and see) how every dollar matters to the point that they feel that if I put down the cents on the return rather than rounding the dollars it might make a difference--so, please, could I just try one more time?

People are stupid financially. Without a bit of training and a lot of experience, it's hard to see how little things, over time, can matter. That the government hides the ball in all that it does does not help matters. Bonds are free money, social security is well funded because of the treasuries they have in the lock box, if we don't spend the amount we planned to increase spending, that's a "cut" and a trillion dollar coin will solve our problems are just some of the rubbish spewed. When 1/2 of the people in any poll can't identify the vice-president, they're supposed to follow "fiscal cliff" news their President keeps claiming only affects the "rich" but that actually changes the money they have depended upon for decades?

Really?

 

[Silverplum]

How about people who simply want to spend 200 - 300 dollars buying a Christmas tree, a few gifts for their children, and having a good Christmas dinner, who then have to delay their rent or some of their other bills. However about these people who have their cars running on a shoestring because they are accustomed to having the money available in January to do more permanent repairs.

Its all good and well to assume that the people who are suffering spent their money on luxuries...however the reality of things is that very few of them did.

I realize that people here have very little compassion for the working poor...but I didn't expect it to be quite this obvious.

There's a mighty difference between WANT and NEED.

Your "compassion" rant has no logic.

 

[Ohiogal]

How about people who simply want to spend 200 - 300 dollars buying a Christmas tree, a few gifts for their children, and having a good Christmas dinner, who then have to delay their rent or some of their other bills. However about these people who have their cars running on a shoestring because they are accustomed to having the money available in January to do more permanent repairs.

A christmas tree can be fake and reused year after year. The few gifts for the children can be done by making things, giving coupons for time or even through freecycle. People who delay their rent for extras aren't making good choices. And that is NOT the government's fault.

Its all good and well to assume that the people who are suffering spent their money on luxuries...however the reality of things is that very few of them did.

A real Christmas tree -- luxury. Gifts bought at stores -- luxuries. Christmas dinner -- expensive ham is a luxury.

I realize that people here have very little compassion for the working poor...but I didn't expect it to be quite this obvious.

There go your assumptions again. No compassion for the working poor? You know nothing quite frankly. But good for you to decide that you know everything about the people commenting.

 

[Ohiogal]

While, at the end of the day, I believe in personal responsibility and accept there will be pain to those who do not practice it--let me add that there will always be some segment of the population that needs to be taken care of.

And I am denying that? Oh yeah, I am not.

Ohiogal can write. She has a job. I bet she understands germ theory. (In that there are nasties everywhere and you should wash your hands.)

Yeah and?

Some are not so "lucky". I know my clients are different from LdiJ's. I don't have a lot of fighting over kids as a deduction and EITC is not a necessary item when it is on a tax return I prepare. (It makes you shake your head when a rich person who, due to good tax planning has so little earned income they get welfare from the Feds.) We never offered RALs and besides, our clients are financially secure and sophisticated enough to not need/want them anyway. But, I've seen poverty. I've seen the desperate look of a person counting their change to see if they can afford a hamburger. I've talked with those struggling to make ends meet when I take a few hours of my season-limited time and volunteer to do their tax returns and hear (and see) how every dollar matters to the point that they feel that if I put down the cents on the return rather than rounding the dollars it might make a difference--so, please, could I just try one more time?

Guess what? I have seen poverty as well. Most of my clients are impoverished. They are in government housing. They get food stamps and medicaid. Making assumptions about people commenting is getting old.

People are stupid financially. Without a bit of training and a lot of experience, it's hard to see how little things, over time, can matter. That the government hides the ball in all that it does does not help matters. Bonds are free money, social security is well funded because of the treasuries they have in the lock box, if we don't spend the amount we planned to increase spending, that's a "cut" and a trillion dollar coin will solve our problems are just some of the rubbish spewed. When 1/2 of the people in any poll can't identify the vice-president, they're supposed to follow "fiscal cliff" news their President keeps claiming only affects the "rich" but that actually changes the money they have depended upon for decades?

Really?

People need to take responsibility for themselves. Those who CHOOSE to spend money on wants rather than needs are making decisions that have consequences. If people put off paying the rent and count on what money COULD come -- well that is a bird in the hand is worth two in the bush. Poor does NOT mean stupid. Poor does NOT mean uneducated. Poor does not mean people can't read. Poor means lack of money. It doesn't have to mean lack of common sense, intelligence, ability to budget. So really -- who is being unreasonable. Those who believe that poor people are stupid and can't follow fiscal cliff news or understand needs versus wants?
Or those who think that lacking money means poverty but is not easily translated to anything but that?

Better yet -- who posting qualifies for EIC or other low income programs?

 

[tranquility]

If people put off paying the rent and count on what money COULD come -- well that is a bird in the hand is worth two in the bush.

Money that HAS come. Every year. This year too--except the government couldn't get its act together and the money they relied on and got in January for years, now does not come until February.

Poor does NOT mean stupid. Poor does NOT mean uneducated. Poor does not mean people can't read. Poor means lack of money. It doesn't have to mean lack of common sense, intelligence, ability to budget. So really -- who is being unreasonable.

Poor can also mean lack of understanding about money. Yesterday, Freakonomics wrote (http://www.freakonomics.com/2013/01/07/how-much-financial-inequality-is-due-to-financial-illiteracy/):

Annamaria Lusardi, whose ground-breaking research on financial literacy has been featured here several times, has put out a new working paper (with co-authors Pierre-Carl Michaud and Olivia S. Mitchell) that could be read as laying much of the blame for the lack of household wealth at the foot of the members of said household. The paper is called “Optimal Financial Knowledge and Wealth Inequality” (abstract; PDF):

While financial knowledge is strongly positively related to household wealth, there is also considerable cross-sectional variation in both financial knowledge and net asset levels. To explore these patterns, we develop a calibrated stochastic life cycle model featuring endogenous financial knowledge accumulation. The model generates substantial wealth inequality, over and above that of standard life cycle models; this is because higher earners typically have more hump-shaped labor income profiles and lower retirement benefits which, when interacted with precautionary saving motives, boost their need for private wealth accumulation and thus financial knowledge.

Our simulations show that endogenous financial knowledge accumulation has the potential to account for a large proportion of wealth inequality. The fraction of the population which is rationally financially “ignorant” depends on the generosity of the retirement system and the level of means-tested benefits. Educational efforts to enhance financial savvy early in the life cycle so as to produce one percentage point excess return per year would be valued highly by people in all educational groups.

Not to get all self-referential, but one good way to “enhance financial savvy early in the life cycle” might be to let people know that it is a bad idea to consistently invest your income in a scheme whose expected value is about -40% (yes, I’m talking about the lottery, again!). That is of course not so easy when the lotteries are run by states who see them as profit centers.

Those who believe that poor people are stupid and can't follow fiscal cliff news or understand needs versus wants?
Or those who think that lacking money means poverty but is not easily translated to anything but that?

Funny thing is, I'm OK smart and followed the fiscal cliff news with great detail not only for what it meant to me individually, but also for what it meant to me professionally. This was the busiest December we've ever had because of all the people coming in for advice on what to do. (Mostly having to do with the Medicare tax surplus on investment income.) I had a class before the bill came out on some of the possibilities. Now, that the bill is out, while I've read and understand CCH's summary (http://tax.cchgroup.com/downloads/files/pdfs/legislation/ATPR.pdf) *I* don't know what all the bill means and I suspect you have even less a clue. Not as an insult, just as a reality check.

 

[LdiJ]

Money that HAS come. Every year. This year too--except the government couldn't get its act together and the money they relied on and got in January for years, now does not come until February.

Poor can also mean lack of understanding about money. Yesterday, Freakonomics wrote (http://www.freakonomics.com/2013/01/07/how-much-financial-inequality-is-due-to-financial-illiteracy/):


Funny thing is, I'm OK smart and followed the fiscal cliff news with great detail not only for what it meant to me individually, but also for what it meant to me professionally. This was the busiest December we've ever had because of all the people coming in for advice on what to do. (Mostly having to do with the Medicare tax surplus on investment income.) I had a class before the bill came out on some of the possibilities. Now, that the bill is out, while I've read and understand CCH's summary (http://tax.cchgroup.com/downloads/files/pdfs/legislation/ATPR.pdf) *I* don't know what all the bill means and I suspect you have even less a clue. Not as an insult, just as a reality check.

One of the reasons why I tend to have more compassion for the working poor, is because I made a comfortable 6 figure salary for 15 years, and then ended up as one of the working poor for about 18 months. My educational background and my work experience didn't coincide with each other and my age worked against me as well. Prior to that I believe that I was pretty arrogant as well about what people should or shouldn't do with their money. It is a very humbling and difficult experience, particularly when you have a child to support.

 

[tranquility]

One of the reasons why I tend to have more compassion for the working poor, is because I made a comfortable 6 figure salary for 15 years, and then ended up as one of the working poor for about 18 months. My educational background and my work experience didn't coincide with each other and my age worked against me as well. Prior to that I believe that I was pretty arrogant as well about what people should or shouldn't do with their money. It is a very humbling and difficult experience, particularly when you have a child to support.

I've been lucky and the only times I've had to count my pennies was while in college (mumble, mumble) years ago and sometimes had to search under the cushions for change to get mac and cheese. (Ramen was unknown to me. Pity.)

I don't think this discussion has to do solely or mostly with compassion, but more theory versus reality. I absolutely believe (and charitably donate) on the basis of teaching a man to fish and you feed him for a lifetime. But I also understand that if you don't give a fish sometimes, that man will starve and no learning will go on. Because I've seen the very real effects of "refund planning" (for lack of a better term) and what happens to some's finances when the plan falls through, I feel for those you speak of who suffer through no fault of their own other than relying on a government that follows its own rules--but doesn't.

Sure, they should plan better. So should the highly paid legislators. Sure, they should live within their means. So should.....interesting. I wonder how many comparisons we can make?

Bottom line for me is that IT'S NOT THE GOVERNMENT'S MONEY!!! It's not. A "refund" is a return of the money that rightfully belongs to the taxpayer. That the powerful mess with that and hurt the weak because they want to keep their cushy jobs, is wrong. That some blame the weak....well, let's just say they should stop wearing those sexy clothes if they don't want to get raped.