Opinion

Instant cash can be costly convenience

Friday, January 30, 2004

Hundreds of Sikeston residents and thousands within the region will line-up today to receive "instant" tax refunds in the form of loans on their anticipated tax returns from the federal government. Virtually all will be low-income residents who need or want their money now and are willing to pay a fee to avoid waiting for the month or so it takes normal returns to make their way through the system.

Two consumer groups this week said that taxpayers last year paid $1.5 billion in high fees to get immediate loans on their expected tax returns.

Without the earned income tax credit program, virtually none of these consumers would be receiving a tax refund. But that program has become an annual expectation that provides return income for low wage earners. The sad truth is that the fees often eat up much of the anticipated tax refund and the low-income wage earners are not much better off than they were before.

The earned income tax credit is a $36 billion program for nearly 20 million Americans. It has become a staple of their annual budget in recent years and without it, many families would have to turn to other charitable or government sources to make ends meet. And thus it makes the fees charged by the immediate loan providers even more punishing.

But I understand that a tax preparation business is a profit center. And to advance instant cash, they should be able to charge a fee. Whether that fee is fair or not is another question.

If those on the bottom of the economic scale would simply understand that the instant cash is costly, the loan providers would be out of business. But some people find themselves in a position that they anticipate the loan on virtually the first day possible and they plan their budgets accordingly.

I'm not sure who to fault for this $1.5 billion windfall. But I do know who suffers the consequences.

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