The voices of Tax Policy Center's researchers and staff
For many US households, the ongoing partial government shutdown is inconvenient. But for low-income households, it may become a severe hardship. If the shutdown goes on much longer, many will lose the support of key programs. These include the Supplemental Nutrition Assistance Program (SNAP) previously known as food stamps, and housing subsidies. And they also potentially include the earned income tax credit (EITC) and child tax credit (CTC), which together lift more people out of poverty than any other government program besides Social Security.
SNAP and housing benefits are delivered monthly – and while the government expects to cover its February obligations for both programs, payments for March and beyond remain uncertain. For now, the government departments that operate these programs are unfunded and largely shuttered.
SNAP is the primary food assistance program in the US and there is strong evidence the program reduces food insecurity and improves nutrition. Housing subsidies improve the lives of their beneficiaries by stabilizing housing, reducing poverty, and giving families access to better neighborhoods with better opportunities.
The timing of the partial government shutdown is particularly ominous because it lines up with an uncertain tax season since this is the first year that the provisions of the Tax Cuts and Jobs Act affect many Americans. And for low-income households, the tax refunds they normally receive through the EITC and the CTC are critical to their financial well-being.
Last year, the IRS delivered almost $300 billion in tax refunds (of that, about one-third reflects the EITC and CTC). That amounted to an average refund of almost $2,800. Because of the EITC and CTC, some low-income parents receive a bump in annual income of over 50 percent and many get refunds that exceed a month’s income. They use that money to catch up on bills and purchase vehicles that can be important for getting to a job. New research also highlights the importance of these refunds in meeting daily needs such as food and rent. These cash-strapped families face substantial hardship if these funds are delayed.
The IRS has announced that it intends to pay many tax refunds after the filing season begins on January 28, even if Congress has not funded the agency’s operations. But even in a normal year, filers who benefit from the EITC or CTC cannot get refunds before February 15. (I’ve been critical of that delay before, which only applies to these returns.)
But even if the IRS is funded soon, is that timetable of paying refunds in mid-February realistic? The agency not only needs to get its regular employees working to prepare for and get through tax season, it also needs to hire a temporary workforce to process returns through May and answer taxpayer questions.
Mandatory spending programs are not affected by a partial government shutdown so some low-income households will continue to receive Social Security benefits and Supplemental Security Income (SSI). But payments from the other programs could be missed or delayed. Given what’s at stake for low-income families, the prudent course is to get the IRS and other agencies that distribute benefits back to work as quickly as possible.
Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Rick Bowmer/AP Photo