Recent Events
At Women In Government's 14th Annual Western Regional Conference in June of 2011, Internet and Streamlines taxes were discussed. Of the 44 states that signed a compact administered by the Streamlined Sales Tax Governing Board, 25 states have passed legislation to adopt it, including Nevada, Utah, and Washington. Four other Western states considered Internet tax legislation this session, including California, Montana, Nevada, and Texas. This has become a contentious issue nationwide this year as states look to increase revenue streams. Legislators discussed the differences in their states, and compared types of action to address this issue.
Background
Approximately 12 million tax payers opted to for a tax refund anticipation or rapid refund loan (RALs) in 2003.
RALs are short term loans offered by commercial tax preparation services to those who are going to receive a tax refund. These short term loans are at extremely high interest rates .The loan is secured with the money from the anticipated tax refund and usually last about 10 days. Because the term is so short and the interest charged so high, consumer rights groups view these loans as predatory and say they cost the working poor more than $500 million a year.
There are a number of alternatives to getting money quickly without costing anything in the process. The best financial move would be for a person to go to her personnel department and adjust her W-2 income tax withholding. This will give her more money in each of her paychecks throughout the year and means she isn't giving the government a free loan of her money until she files her tax return.
According to a 2005 study by the National Consumer Law Center, tax preparers and lenders strip about $1.57 billion in fees each year from the earned-income tax credits paid to working parents.
Source: Center for Responsible Lending, 2006.
Legislation
- Illinois SB 2844: Amends the Consumer Fraud and Deceptive Business Practices Act. Makes it an unlawful practice within the meaning of the Act for a facilitator to directly or indirectly charge a refund anticipation loan fee for the making of or in connection with a refund anticipation loan when: the refund anticipation loan is issued to a borrower who is eligible to receive the Illinois Earned Income Tax Credit under Section 12 of the Illinois Income Tax Act.
- Iowa HF 352: The purpose of this chapter is to protect consumers who enter into refund anticipation loans and refund anticipation check transactions and to limit fees for refund anticipation loans facilitated in this state. This chapter is to be construed as a consumer protection statute for all purposes.
- Minnesota Statutes 2005: The statutes relate to standards of conduct for tax preparers.
- SB 07115 (New York) Amends the Banking Law in relation to refund anticipation loans and ensures that the consumer is informed of the conditions of the loan to prevent any unlawful practices or fraud.
Publications
Refund Anticipation Loans: Are They Worth It?
Step In The Right Direction : Recent Declines in Refund Loan Usage Among Low-Income Tazpayers
Beware of Quick Tax Refund Loans
Beware the Refund Anticipation Loan
Consumer Advocates Warn Taxpayers Against New Pay Stub Refund Anticipation Loans
Refund Anticipation Loans: Updated Facts & Figures
Noel Bravo, Center for the Study of Social Policy, "Policy Matters Project" PowerPoint Slides - Eastern Region
Noel Bravo, Center for the Study of Social Policy, "Policy Matters Project" PowerPoint Slides - Southern Region
Noel Bravo, Center for the Study of Social Policy, "Policy Matters Project" PowerPoint Slides - Midwestern Region
Noel Bravo, Center for the Study of Social Policy, "Policy Matters Project" PowerPoint Slides - Western Region
Additional Resources
