Brookings: RALs are Bad for You Even if You Want Them

Brookings: RALs are Bad for You Even if You Want Them

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Alan Berube writing for Brookings thinks its a good thing that poor people can no longer get refund anticipation loans (RALs) (emphasis is mine):

Last week’s… positive EITC development was IRS’ decision to suspend availability of the “debt indicator” next tax filing season.

This indicator, provided to tax professionals, enables preparers to identify whether or not the taxpayer’s refund will be reduced via an offset for federal debts, such as prior-year taxes owed or student loan arrears.

Sounds innocent enough, but the debt indicator essentially enables preparers to make those high-priced, essentially risk-free refund loans, most of them to low-income taxpayers who receive the EITC. Without it, the rapid-refund business will probably (hopefully) die a quick death.

That’s a good thing for low-income taxpayers, though it won’t necessarily do much to improve the dire financial conditions that drive some of these families to refund loans in the first place.

I am no fan of RALs, but just how is it a good thing for low-income taxpayers that they will no longer be able to purchase a service they wish to purchase?

Surely Mr. Berube isn’t suggesting that demand for a product or service makes that product or service immoral. If he is, we will have to outlaw doctors and mechanics, as well.

And financial need also drives people to do the following things, but I am quite sure Mr. Berube doesn’t think people should be prevented from doing them:

  • Obtain a second mortgage
  • Finance the purchase of a car
  • Max out their credit cards
  • Support government handout policies that are paid for by others

Mr. Berube neatly exemplifies the attitude of an elitist intellectual: He knows what’s good for you even if you don’t know what’s good for you.


About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida