Dealing with a Deadbeat

Its now official: The state of California is stiffing everyone it owes tax refunds “until further notice” see http://www.ftb.ca.gov/refund_delay_2010.shtml. The good news is that they were forced to take this action just before the election, so everyone voting can see how dysfunctional our state legislature is. The situation must be dire or the incumbents up for reelection would have surely found a way to paper over it a couple more weeks…..

This is especially galling given that we are talking about an involuntary loan (at zero interest) by ordinary taxpayers to the State. It’s your money they borrowed, and now they can’t return it.

If California owes you money from 2009 or prior, there isn’t much you can do except wait. But you can take steps to make sure you aren’t in this position again. How do you deal with a substance abuser? Don’t enable them. How should we deal with a chronic debt abusing legislature? Same thing! By careful planning NOW you can make sure you owe them instead of the other way around. That way it will be the Franchise Tax Board patiently waiting for you, while you earn interest, rather than you earning no interest and hoping Sacramento will someday return your money to you.

Care must be taken to not place yourself in a penalty situation, or possibly foregoing other tax benefits by delaying payments to the State, but with early, careful planning you can avoid being the unwilling lender to a flakey borrower.

Stimulate What?

Did you know that $203 Million of the Economic Stimulus money that was doled out last year was given to the IRS? Further, it was revealed this week in a report from the Treasury Inspector General that these funds are in danger of being misspent due to continued problems with contract oversight. What a surprise.

I know the older I get the more my memory is fading (especially when it comes to my anniversary or my family's birthdays), but it seems to me that the entire premise around the economic stimulus payments was to stimulate the economy by putting money to work on projects that would multiply the dollar impact and create private sector jobs. The term “Shovel ready projects” was what I could swear I heard used to rationalize the expansion in deficit spending that would result. The tradeoff was supposed to be new construction jobs and improvements to infrastructure. Did I misunderstand?

The Treasury Inspector General’s revelation that some of the funds might be misspent is an understatement. I would submit that ALL of the funds are being misspent since they are to be used to support the reprogramming of IRS’s computer systems, the updating of corresponding tax forms and publications, and taxpayer services. All of these projects are normal, annually recurring activities of that agency. The fact that we had to expand the deficit in one time legislation to pay for these is a good indication of the absence of fiscal acumen in Washington.

Why didn’t Congress think of this?

Last week the IRS announced that they will no longer be printing and mailing tax forms to individuals. The printed forms will now only be available by internet or from libraries and Government offices.

Of course, the reason for this change in policy is to save the taxpayers' money by avoiding printing, handling and postage costs.

I think it’s a great idea, but it falls short of its potential. While there is no question that the costs to send out these forms must be significant, the real costs to taxpayers occurs on the return trip.

If they really wanted to save us money we could just forget the whole deal.