The first novel coronavirus-fueled stimulus payments to 60 million Americans with direct deposit bank accounts will be mailed this week or early next, according to Larry Kudlow, the director of the National Economic Council. Paper checks will start being sent May 3. But many people won’t get payments from the Treasury for months. And millions of Americans whose incomes are so low that they aren’t required to file taxes may never see any of this money, even though federal officials say they will work hard to track them down. The Institute on Taxation and Economic Policy estimates that there are 7.5 million households with 9 million adults and 4 million children who won’t get their money soon, if ever.
The payments—part of the $2.2 trillion “stimulus” package passed by Congress to reduce the impact of fighting the novel coronavirus with stay-at-home, shutter-your-business policies—can be as much as $1,200 for each adult and $2,400 for a couple, with $500 extra for each child. How much depends on earnings, with those making more money getting smaller amounts, and nothing going to those with adjusted gross incomes of $99,000 or more.
Finding the nonfilers won’t be easy. Said Elaine Maag, a research associate in the Urban-Brookings Tax Policy Center: "These folks are very disconnected from the tax system. It's going to be very hard to get their payments out." Nonfilers typically earn less than the standard deduction: $12,200 for an individual, twice that for a married couple. One reason they don’t file is because the tax credits they can receive by doing so, especially if they don’t have children, are quite small. But $1,200 matters when you’re only making 12 grand a year.
Chuck Marr, senior director of federal tax policy at the Center on Budget and Policy Priorities, said: "This group is going to have to file, so it is key for the government to make it easy for them to do so and then to have very strong outreach to get the word out."
But, as Katie Lobosco points out, a study by the California Policy Lab found that a concerted, two-year effort to get nonfilers to file to take advantage of the Earned Income Tax Credit “had no effect on increasing the number of people who filed a tax return or claimed the EITCs, indicating that these additional, targeted outreach strategies were not enough to increase take-up of the EITCs amongst low-income households.”
Some lawmakers have suggested one partial solution to this injustice is letting government agencies access each others’ data so that impoverished veterans on pensions and disabled people receiving Supplemental Security payments wouldn’t have to file with the IRS to get stimulus payments. This could reach another 3 million people, Marr told Lobosco.
Poor people get it in the neck coming and going. It’s not just that they don’t have direct deposit accounts. Many, if not most, are cut off from the banking system entirely. For the lucky ones whom the government does manage to track down, the payment will come in the form of a check that very many of them will have to take to a cash-checking operation, which will take a slice for itself.
In 2014, the USPS inspector general (IG) found that 68 million adults are in this category. A Federal Deposit Insurance Corporation report in 2015 found that 7% of U.S. households had no bank account at all, and another 19.9% relied on often predatory payday lenders or check cashers. The IG’s report found that the average underserved household spends $2,412 each year on interest and fees for alternative financial services. That rip-off could be ended with postal banking:
Postal financial services may appeal to many customers who feel abandoned by major financial institutions. Postal organizations have an unmatched ability to reach consumers from diverse backgrounds. Many international posts are already garnering significant new revenue and keeping citizens connected by offering financial services. Financial services have been the single best new opportunity for posts to earn additional revenue. For the Postal Service, this might ultimately translate into $8.9 billion per year.
A number of Democratic presidential candidates, including Sens. Bernie Sanders and Elizabeth Warren, have backed the idea of postal banking, and two years ago this month Sen. Kirsten Gillibrand presented legislation to accomplish just that.
Said the senator in a press release at the time: ”The Postal Bank would solve this problem by putting a retail bank branch in all of the U.S. Postal Service’s 30,000 locations, providing low-cost, basic financial services to all Americans, and effectively ending predatory lending nationwide. Politicians in Washington have taken millions of dollars from payday lenders to help protect this industry’s predatory behavior on hardworking families, and it has to stop.”
Like the overwhelming majority of legislation proposed these days in the Senate or passed by the House and sent to the Senate, her bill found its way into Majority Leader Mitch McConnell’s circular file, which ought to be labeled “Republican Bipartisanship.”