When Americans Get Their Tax Refunds, They Go to the Dentist

Megan, who currently lives in Pittsburgh, was hospitalized in September for pneumonia. It was just a one-day stay, and she had health insurance, but even so, the bills piled up, eventually totaling $6,500.

The only thing that made paying them realistic, she said, was that she received a $4,200 tax refund this year.

“I would have put off my medical payments [without the refund],” she told me via email. “Between rent and day to day expenses, I don’t have the income to pay both. … Even with insurance the numbers seemed insurmountable until I got my refund. If it wasn’t for that I would have had to reapply for payment plans with the risk of being sent to collections.”

Tax returns were officially due this week, which means that the roughly 80 percent of filers who receive refunds will soon have their money, if they don’t have it already. The average tax refund so far this year is $2,995, which is roughly in line with last year. For the average family that receives a refund, the amount is equal to nearly six weeks’ income. And a big proportion of the money Americans receive during refund season, like Megan’s, goes to pay for health care.

According to a report from the JP Morgan Chase and Co. Institute, families who receive a tax refund increase their out of pocket health care spending by 60 percent the following week. Spending on health care remains higher than normal for 75 days post-refund.

“The cash infusion represented by a tax refund payment allowed more people to make more purchases of healthcare goods and services, but, even more consequentially, it facilitated larger payments,” the report said. “This implies that the cash infusion generated by a tax refund payment triggered additional spending on large healthcare ticket items that consumers could have least afforded out of their pre-refund cash flow.”

“100 percent of ours is going to pay for prenatal care and the birth of our second child, due in June,” said Molly, who received a refund of around $2,000 for her family’s state and local taxes. “Our first child’s 2017 birth was uncomplicated and routine, and while I don’t remember what we paid out of pocket versus what insurance covered, the birth, the epidural anesthesiologist, the recovery, and a one-day stay in pediatrics (due to jaundice, probably the most common newborn treatment there is) was a little over $20,000. So we’re counting on the 2019 refunds going to paying off this birth as well, as we will easily hit our deductible.”

62 percent of the additional health care spending triggered by refunds went to in-person payments to health care service providers. That indicates that the higher spending isn’t limited to paying bills for past services, but that tax refunds actually led families to seek care that they had put off until they received a cash infusion. Dentists receive a disproportionate share of the additional spending: One in four adults with incomes below the poverty line skip needed dental work because of costs, and dental-related issues are responsible for about $1 billion per year in emergency room spending.

That so many Americans need a refund windfall in order to access medical care, sadly, makes sense. About one in four adults – 65 million people – reported skipping a medical treatment due to costs in the last 12 months, according to a recent West Health-Gallup survey. Last year, Americans borrowed a collective $88 billion for medical treatments, which doesn’t include the totals from the now ubiquitous medical crowdfunding campaigns that have proliferated on social media.

So tax season injects cash for those households to get the care they either would have had to delay or go into debt to obtain.

It’s worth noting that receiving a big refund means a taxpayer overpaid her taxes during the year, whether via automatic withholdings from paychecks or by paying quarterly estimated taxes (which is a requirement for the self-employed and independent contractors), thus giving the government an interest-free loan. A refund is just that overpaid amount being paid back.

However, the public doesn’t really view it that way: According to a recent New York Times poll, 77 percent of people would prefer to overpay and receive a refund come tax time, which makes sense. 40 percent of people don’t have $400 to cover an emergency cost, and the average savings amongst the poorest 20 percent of households is zero dollars, so an unexpected tax payment can deal a real blow.

One in four adults reported skipping a medical treatment due to costs.

But people also use their refund as a way to enforce savings: Paying their money to the government and then getting it back means they can’t spend it in the interim. Recent reports have shown that the Trump administration, in an attempt to inject money from its 2017 tax bill into the economy sooner, decreased withholdings so that people had less taken out of each paycheck for taxes throughout the year, meaning they were less likely to overpay their taxes and require a refund. But that ploy has backfired spectacularly. Many taxpayers were reportedly upset at getting smaller refunds than they expected come Tax Day, even if their overall bill was in many instances lower than the year before.

“We actually aren’t those types who try to have a big refund each year. We’d rather not allow the government to keep an interest-free loan all year. My husband has tweaked his withholdings so we do get more in the paycheck each week because we need it for all the copays, gas, etc,” said Lindsey Cox of Thomasville, North Carolina. Both she and her husband carry a gene for a rare disease called Van Maldergem Syndrome, which two of her three children have, while the third has severe nervous system issues. Their health care bills total hundreds of thousands of dollars annually. This year, their tax refund of $2,940 went to an array of household needs.

“Our tax return went to catch up on the house payment, electric bill, other small miscellaneous bills, and some car maintenance we had been putting off, like inspections, tire rotations, oil changes, etc.,” Cox said. “We’ve become experts at gaming our system and know for instance, we can be 60 days behind on electric before we face it being cut off. We’ve learned very well how to rob Peter to pay Paul and stay afloat in the process.”

That so many Americans need a quick injection of money in order to see a doctor or access other necessities is a problem that can be addressed by policy: Think universal health care, or the proposals to both expand the pool of those eligible for the Earned Income Tax Credit and allow low-income households to receive some of their refund early. As Bryce Covert explained, “as powerful as the EITC is, there are plenty of people who receive barely any money from it or miss out entirely.”

Tax Day should be a celebration of America’s commitment to civic responsibility and collective welfare, not a grim reminder that far too many people can’t access things that should be basic human rights. However, for too many, a tax refund isn’t just the difference between staying afloat and not, but between seeing a doctor and not, which can literally be the difference between life and death.

Editor’s note: When requested, last names have been withheld to allow people to talk freely about their finances.






Congressional Dems Are Backing A Tax Plan That Would Actually Help Poor People

Diane Sullivan has bounced between more and less extreme bouts of poverty all her adult life, even though she’s worked since she was 14 years old. She has six children, and while two are no longer in her home, there were times when she was trying to keep them all warm and fed while earning as little as $25,000 a year; at most, she’s earned $39,000 a year.

But she’s had a constant lifeline: the Earned Income Tax Credit (EITC).

When working parents who make less than $55,000 file their taxes, they can expect a credit back that averages a little more than $3,000 every year. Very poor working people without children can also claim a much smaller credit of $295. In 2016, nearly 26 million households received the money, and it lifted 5.8 million people out of poverty. It’s been linked to better health and educational outcomes for kids and their parents.

When Sullivan became a parent for the first time at the age of 18, she got the credit back when she filed her taxes. She’s now 45 and has received it nearly every year since.

“It has literally fed my family” when wages and food stamps didn’t stretch far enough, Sullivan recalled. “I’ve been able to catch up on rent. It’s kept the lights and the heat on.”

Sullivan lives in Medford, Massachusetts, a couple miles north of Boston, and utility costs can skyrocket in the harsh winters even though she carefully keeps dials turned as low as possible. While the electric company can’t cut her off during the worst of it, as soon as that moratorium lifts she’s often been plunged deep into debt — sometimes hundreds of dollars, even during a mild season.

The financial need among EITC recipients is often urgent: Recipients are more likely to file early in order to get the money as quickly as possible, often at the end of January or early February. And like Sullivan, most use the money to pay down bills and debt or to cover their basic needs; in 2015, 80 percent reported using the money to pay rent, mortgages, utility bills, or credit card debt.

“When I receive the EITC credit … I can pay the bill and get caught up, or at least be able to use that to negotiate with a down payment plan,” she said. “It creates such a relief to know that I can rest my head at night knowing that when I wake up tomorrow there’s not somebody creeping outside my door looking for my electric meter to cut it off.”

“Even at times when I haven’t been in crisis, I’ve been able to use my EITC to supplement my income over the next several months,” she added. It’s during those times that the credit has allowed her to send her children on field trips or participate in sports programs. “It can really enhance the quality of life.” One year, after going without a car for a decade, she spent $2,000 to buy one that allowed her to drive to the grocery store, rather than walking home holding groceries with freezing fingers.

But as powerful as the EITC is, there are plenty of people who receive barely any money from it or miss out entirely. In fact, a childless person living right at the poverty line who gets the credit will still owe federal taxes, pushing him deeper into poverty.

A childless person living right at the poverty line who gets the credit will still owe federal taxes.

The EITC is also tied directly to work; it doesn’t start phasing in until a family earns its first dollar. That means anyone who is destitute enough to be getting by without any official pay — either earning under the table or not at all — can’t qualify. The share of people who survive with no job and no government cash assistance has been since the mid-90s, reaching one in five single mothers by 2008.

Some politicians want to fix these problems and go even further. Last week, Sens. Sherrod Brown (D-OH), Michael Bennet (D-CO), Ron Wyden (D-OR), and Richard Durbin (D-IL), introduced legislation to expand the EITC for parents and significantly boost it for the childless — increasing the maximum amount a childless worker could get from $529 to over $2,000. It also allows recipients to access up to $500 ahead of tax time, which would hopefully provide families relief throughout the year, not just in one lump at tax time, so they don’t have to turn to payday lenders or go into debt when emergencies arise. The bill has garnered support from nearly every Democrat in the Senate.

In 2017, Brown and then-freshman Rep. Ro Khanna (D-CA) put forward a plan that would have expanded the EITC even more for a poor family with two children, increasing it from the current maximum of about $5,700 to more than $10,000, while childless workers would see their credit grow six-fold. The two lawmakers, along with Rep. Bonnie Watson Coleman (D-NJ), resurfaced the idea in February and extended it to students and people caring for young children, aging parents, and other relatives — none of whom are currently eligible.

The EITC is “the most effective tool we have to put more money in the pockets of ordinary Americans,” Brown, Khanna, and Watson Coleman wrote in an op-ed in March. “We’ve seen a lot of ideas floated to make our economy fairer and fight income inequality. Expanding the EITC…needs to be at the center of those conversations.”

Diane Sullivan is luckier than some: Beyond the federal EITC credit she can expect every April, she can also count on a supplemental state version that adds another 30 percent of its worth because she lives in Massachusetts. But 19 states don’t have such a program. In addition to a federal expansion, the rest could start their own and ensure that their credits are refundable so that families can get the money whether or not they owe taxes.

“We should acknowledge that theses tax credits are a critical lifeline for families,” Sullivan said.



The Trump Administration Is Making It Harder for Workers to Hold Big Corporations Accountable

The government wants to make it much harder for workers to hold employers accountable for wage theft, hours violations, and unionbusting by complicating the answer to a simple question: Who do you work for?

Historically, if two entities oversee aspects of someone’s work experience — such as wages, hours, and policies — either separately or together, they could be considered “joint employers,” which means they are both liable for labor violations. While this standard isn’t used very often, it can be a powerful tool for holding large corporations accountable.

Think contractors who work alongside direct employees, doing the same work at a site where the parent company controls hours and policies, the staffing company handles payroll and employee screening, and both have hiring and firing rights. If workers filed a complaint, a judge might determine that the worksite and staffing company are joint employers, depending on the specific facts of the case.

Now, after a failed attempt at narrowing the definition of a joint employer in Congress in 2017, the Trump administration is turning to the regulatory process to make it harder for workers to file claims that rely on this standard.

When Congress passed the Fair Labor Standards Act in 1937, it explicitly acknowledged that some workers, in disputes over wages, hours, and child labor practices, might be in a joint employer position. The question has been a subject of back and forth litigation and rulemaking because of the high stakes. The landmark Browning-Ferris case in 2015, which briefly established more protections for people making joint employer claims, allowed workers to leverage bigger wins and push for a larger culture of change. (Currently, a combination of litigation and rulemaking have the ruling’s status in flux.)

The Department of Labor recently announced a proposed rule to narrow the standards of who counts as a “joint employer” under the FLSA. It is extremely restrictive, requiring companies to meet a highly specific four-point test and disallowing consideration of other factors. For example, if a contract includes hiring and firing rights for the parent company but they aren’t exercised, the court couldn’t consider that, and the parties would fail the joint employer test; the parent company would not be liable for damages.

Much news coverage on the administration’s attempt has focused on what it means for fast food workers, who often work in franchises with a parent company and local owner. But the implications are even bigger, affecting millions of workers across the economy in the garment, agricultural, construction, hospitality, and building services industries, among others. It’s an especially important distinction for people caught in the dramatic increase in “contingent labor” in recent years.

It also affects third-party logistics (3PL) employees who handle outsourced elements of the supply chain such as packaging, delivery, warehouse maintenance, and more. Think forklift operators at factory warehouses and delivery drivers. 3PL is one of the biggest areas of growth, according to Tia Koonse, Legal and Policy Research Manager at the UCLA Labor Center. 86 percent of Fortune 500 companies are using third-party logistics agencies, outsourcing labor along with liabilities to increase profits. Nearly half of Google’s workforce, for example, is not directly employed by Google.

“I think that this [proposed rule] is aimed at workers who have spoken up, and the workers are not going to back down,” commented Jonnee Bentley, associate general counsel at SEIU. Fight for $15 worker-organizers have achieved significant victories across the U.S. in recent years; for example, there was a 2014 NLRB ruling in favor of McDonald’s workers who complained about retaliation for labor organizing.

As part of its proposed rule, the Department of Labor provided a handy breakdown of hypothetical examples for people wondering how different scenarios might be interpreted under the new rule, which reads more like a how-to on avoiding a joint employer determination. It’s also heavily stacked with examples from fast food franchises, although according to Catherine K. Ruckelshaus, general counsel at the National Employment Law Project, franchises haven’t been involved in joint employer disputes under the FLSA.

Curiously, though the rule touts cost savings for business, the only costs calculated in the current draft available for comment are $420 million in expenses associated with implementation. Under the Obama administration, franchise growth consistently outperformed the private sector, suggesting that increasing joint employer protections did not harm business growth.

I think that this is aimed at workers who have spoken up, and the workers are not going to back down.
– Jonnee Bentley

Undermining the way employers and courts interpret the FLSA isn’t the only way the Trump administration is using the rulemaking process to make it harder to bring joint employer claims. Last year, the NLRB announced a proposed rule, not yet finalized, to redefine the interpretation of the joint employer standard in the National Labor Relations Act, the legislation that surrounds worker organizing and labor disputes: If workers want to start a union, complain about unionbusting activity, or get support with the fight for a fair contract, they need the NLRB.

The NLRB wants to shift the joint employer definition to one that requires direct and immediate control of working conditions, moving away from broader Obama-era guidance that also accounted for “indirect control,” such as exerting guidance over business practices or providing software used to run a business.

The change would be good news for companies such as McDonald’s, as it would make it more likely that the corporation would not be considered a joint employer of franchise employees for the purpose of trying to unionize, and would have no obligation to come to the table to bargain. The franchise operator, meanwhile, would have limited options for meeting worker demands, because of price setting and other dictates set by the corporation. It should be noted that even in a case where franchise employees did manage to prove joint employer status and win a union contract, it wouldn’t automatically apply to other franchises — but the win could help workers organizing at other locations.

That these two proposals are similar is not a coincidence, Bentley said. “They’re trying to make it easier for big corporations to avoid liability by using contractors or franchisers.” The Obama-era guidance has enabled workers to hold franchises accountable for violations in the past.

“It’s part of the systematic dismantling of gains made in the previous administration,” said Koonse. “I feel the [Department of Labor] rule does not hold joint employers accountable in the way Congress intended,” she added, noting that the definition as proposed is so narrow that it may not withstand legal scrutiny.

The push through multiple venues to make it harder for workers to hold joint employers accountable is part of a larger pattern of attacks on labor rights, such as undermining overtime rules, cutting numbers of OSHA inspectors, and cutting billions of dollars in funding from the Black Lung Disability Trust, which supports coal miners living with black lung disease. One of Trump’s earliest cabinet appointments was to name fast-food giant Andrew Puzder secretary of labor — Puzder ended up withdrawing after outcry, but the initial nomination signaled a much more business-friendly approach to worker rights and protections. Working to unwind rulemaking from prior administrations and develop more restrictive interpretations of the law fulfills the president’s deregulation mandate, at a high cost to workers.


First Person

I Couldn’t Get a Bank Account. My Girlfriend Paid the Price for Helping Out.

The day I started my new job as a cashier at Tedeschi Food Shops, I went in for my training feeling more hopeful than I had in a long time. I’d had the 1998 Buick my grandmother left behind when she died for a little over four months, so I finally had a better chance at making some extra money. I was already dreaming about everything I could do: buy my textbooks at the cheapest price in advance of the semester instead of relying on my scholarship money and the campus store, and be able to contribute next year by buying a set of new utensils for the on-campus apartment I was going to be sharing with three people.

But when my manager was giving me paperwork and collecting my forms of identification, I realized this job would be yet another situation where not having a bank account would be a problem.

Tedeschi Food Shops didn’t offer paper checks as a form of my payment, like my other jobs tutoring and grooming dogs had. There were two options: Sign up for direct deposit with a bank account, or have your paycheck put on a payroll debit card, which would charge me a fee of around $5 for every ATM transaction. The use of payroll cards is on the rise, particularly among freelancers and independent contractors. In 2016, 8.7 million people received payroll cards, compared to just 5.5 million employees receiving paper checks.

I was part of the 8.4 million households who are unbanked in the U.S. as of 2017, according to a Federal Deposit Insurance Corporation survey. I didn’t have an account because of former credit and account issues, like 14 percent of unbanked people; when I was 17, my dad and I purposefully overdrew my bank account by about $400 to cover basic necessities when he lost his job for a few months. We both thought we’d be able to pay it back fairly quickly, but we couldn’t, and my account closed.

People who are unbanked (or underbanked, meaning they have some access to financial services, but not everything they need) spend an average of 10 percent of their annual income just to access basic services like check cashing or credit. I had so little already, with barely any cash saved and an hourly job that paid Massachusetts minimum wage ($8 per hour at the time). I couldn’t afford to lose a portion of my paychecks to ATM fees.

Instead, I built up the nerve to talk to my girlfriend of four years and ask her if she’d let me use her bank account to get paid.

Like many people who grow up poor, my relationship to money impacted all my other relationships. I didn’t want to be financially dependent on my girlfriend. I wanted us to be able to make the decision to share our finances someday when we lived together and both felt we were ready. But I also didn’t have many other options; my dad had been without a bank account for longer than I had, and he was my main support system after my mom passed away.

My girlfriend said yes, and I put her account details down on my direct deposit form. I started picturing how I would feel when I got the money out of the ATM after being paid the following week. It was more money and more hours than I’d made at my on-campus tutoring job. I just wished that finances didn’t have to complicate my relationship all the time. I wanted to save up to take my girlfriend to Provincetown for her birthday that summer, but I didn’t want to share every single detail of my financial situation with her yet.

Sharing a bank account required an immense level of trust. I was putting all the money I was making into her account and relying on her to take it out of the ATM and give it to me. She had access to find out exactly how much I was making per paycheck and if I decided to make an online purchase with her permission, she could see every detail in her account statement.

It made me feel extremely vulnerable. I scrutinized a lot of my own purchases — would buying this make me seem irresponsible? Then I scrutinized my relationship — what if she no longer wanted to be in a relationship because she realized what a burden it was to date someone who was poor? What if I never climbed out of poverty like I hoped I would after college, and I had to rely on her and her bank account for the rest of our lives?

I'd rarely had good fortune when it came to finances.

And then, a few weeks after I started at Tedeschi, my girlfriend also got a job there. We both needed summer jobs to save between our junior and senior years of college, and it was the perfect fit for her, within walking distance of her house. The day she went in for her training, she got frustrating news: Because her bank account was already attached to my direct deposit, she couldn’t get paid the same way. She had to use a payroll debit card and lose the $5 every time she took her paycheck out of the ATM. We talked about seeing if I could switch and let her use her own account to get paid, but she said it seemed like more trouble than it was worth.

She was essentially being punished for doing me a favor.

All relationships have their challenges, but I felt the strain of our socioeconomic differences. There was a power dynamic underlying every interaction. I felt like I had to be the “perfect” poor person: I couldn’t make any reckless decisions, couldn’t spend my income on anything frivolous, had to work as hard as humanly possible to get over the poverty line. My girlfriend never made me feel lesser because my family had less money, but I felt it all the same.

When you’re poor, all your relationships are strained by your lack of money. I’d felt it in moments where my best friend had to drive me to Walmart when my dad and I didn’t have a car so I could get school supplies. Or when my friend printed my high school papers for me because we didn’t have a printer. When I had to turn down opportunities to go out with my friends because I knew I couldn’t afford dinner and a movie. When all my friends had brand new decked-out dorm rooms and mine was decorated in hand-me-downs and DIY collages I made for less than $10.

At the end of that summer, my girlfriend and I took our trip to Provincetown. We both took work off for the long weekend and headed out in my green Buick. The hotel I’d booked as a birthday gift to her was one of the cheapest I could find that was three stars or more, and it was squarely in between all the things we wanted to do on our trip.

On our way to the hotel, we stopped at a bank branch to deposit some money into my girlfriend’s account to use during our trip. A bank associate asked me if I wanted to open my own account. I told her I thought I wouldn’t be able to because of past account issues and she encouraged me to apply anyway.

After 15 minutes, I learned I was approved. It could have been because I’d been building credit with a Discover credit card for several months, because I paid my Sprint phone bill on time, or because I’d been under 18 when I overdrew my checking account. I wasn’t sure but didn’t question why the bank was allowing me to open a new account; I’d rarely had good fortune when it came to finances and I didn’t want to jinx what was a step in the right direction. After four years, I was able to open my own account again. I could buy gifts online for my girlfriend as a surprise without worrying she’d see the cost on her statement. I could make financial decisions that were visible only to me without worrying how they might impact someone else’s life.

I could have control over my own money: How I kept it, how I spent it, where it went.


First Person

I’m Disabled. The Trump Administration’s New Rule Could Take My SNAP Anyway.

Last month, the Trump administration introduced a new rule to cut Supplemental Nutrition Assistance Program (SNAP) benefits. The rule is geared towards so-called “able-bodied adults without dependents” who are unable to document 20 hours of work a week. When I heard the news, I double-checked my schedule, and I was in the clear: 35 hours that week. If I had missed a shift or two, then the outlook wouldn’t be so optimistic.

My fibromyalgia doesn’t care about my work schedule. It doesn’t time its flare-ups according to my current proximity to heating pads. Even more than Beamer, my service dog, fibromyalgia is the most constant presence in my life, on my mind at all hours of the day. In the morning, my joints could be so sore that I forgo my cup of coffee, because I can’t trust my grip and I don’t want to clean up another shattered mug. By the afternoon, those aches may give way to a fog that clouds my mind until any attempt at sustained concentration feels like running up a downward escalator — a lot of effort, but little payoff.

People with disabilities are supposed to be spared from the cuts. But in practice, many people with serious health conditions will be at risk of losing food assistance, because SNAP uses other government programs with an extremely limited definition of disability as proxies for disability status. So, I’m on the chopping block.

If I need to miss a shift because I woke up feeling particularly sore or because the afternoon fog rolled in early, the benefits I rely on to eat are threatened. Good day or bad, doctor’s appointment or not, I have to make sure I’m on time and ready, smiling at the customer service desk of the museum that is my work place.

Managing my condition is a full-time job, in addition to the job that actually pays me. To be able to show up for work, I have to go to three doctors’ appointments per week: two sessions of mental therapy and one session of occupational physical therapy. That doesn’t include the constant stream of other specialists who might have some new insight into my pain management: psychiatrists, rheumatologists, and pulmonologists.

Managing my condition is a full-time job.

All told, the copays add up to about $240 a month, just for the therapy sessions. That’s 12 times what I get from the Supplemental Nutrition Assistance Program. 20 bucks a month for food sounds trivial, but anyone who has ever really struggled knows that $20 can make or break you.  For me, it’s the difference between an extra visit with a specialist or suffering until the next paycheck hits.

That doesn’t mean $20 is enough — like most of the strategies I use to treat my disease, SNAP is inadequate but essential. But the administration is putting it at risk with this new rule.

All of us have limited time and energy to spend in our 24 hours. But for some of us, to make it through requires more effort than others. In the three years since my diagnosis, I’ve come to terms with the fact that fibromyalgia isn’t going away. The appointments and the meds and Beamer don’t care about my work schedule because they make my schedule possible in the first place. With this latest rule, the Trump Administration is doing the opposite — they insist that I continuously prove that I’m building a life for myself. Why can’t I just build it?

Editor’s note: To leave a comment on the proposed regulation to limit states’ ability to waive work requirements, visit handsoffSNAP.org.