Refund Anticipation Loans: Goodbye and Good Riddance

Wednesday, August 11, 2010 at 7:33 PM by

“Get your tax refund sooner!” advertise some tax preparers come tax season. Take out your glasses and read the fine print, though, because this way of receiving your tax refund is actually a loan, and one that carries a heavy price. Thanks to a policy change made by the IRS, these refund anticipation loans (also known as RALs) may be a relic of the past.

Here’s how it worked: RALs were secured by the tax filer’s expected refund, which was then assigned to a bank partnering with the tax preparation firm. A temporary account was set up at that bank to receive the refund from the government. The loan was paid to the tax filer within a day or two, and the refund arrived at the bank within a week or two.

For this convenience, filers pay high costs. The National Consumer Law Center and Consumer Federation of America found that effective annual interest rates for RALs ranged from about 40% to over 700%. Read more

Categories: Blog, EITC, federal issues, income taxes, taxes | Comments Off on Refund Anticipation Loans: Goodbye and Good Riddance

Tax and spending rankings: Test your knowledge with our quiz

Tuesday, August 10, 2010 at 2:00 PM by

The Wisconsin Budget Project recently analyzed the new U.S. Census Bureau data (from fiscal year 2008) regarding state and local revenue and spending, and we prepared a short paper showing the rankings and how they have change since 2000. We also prepared an updated version of our tax and spending quiz about how Wisconsin compares to other states.

Before you read any further, please take a look at the quiz and see how many of the 8 multiple choice questions you can answer correctly!

Anyone who gets at least 7 of the answers right wins a one-year free subscription to our Revenue Matters e-newsletter!! (If you miss two or more, you win a free lifetime subscription to Revenue Matters!)

If you got many of the answers wrong, you have plenty of company. Although fiscal year 2008 was the third straight year that per capita taxes and spending in Wisconsin were both below the national average, that story has yet to seep into public consciousness. Read more

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The Bad News about the Good News

Monday, August 9, 2010 at 3:22 PM by

Wisconsin’s unemployment rate is inching downwards. That’s the good news.

Unfortunately, the lower unemployment rate means that Wisconsin residents will be eligible for fewer weeks of unemployment benefits: a maximum of 93 weeks, down from 99 weeks. That’s the bad news. What’s more, if our unemployment level continues to decrease (good news!), we may soon drop down to a maximum of 86 weeks of unemployment benefits (bad news).

Unraveling the reasons for the change in the number of weeks of benefits requires a little bit of math and a high tolerance for acronyms. The equation looks like this: 93 weeks of benefits available in Wisconsin = 26 weeks of UI + 47 weeks of EUC + 20 weeks of EB. Let’s take a closer look at that equation to break it down into understandable components.

Those 93 weeks of unemployment benefit – or 99, or 86 – are actually a combination of benefits from three separate programs. Read more

Categories: Blog, federal issues, Recovery Act, unemployment benefits | Comments Off on The Bad News about the Good News

U.S. Senate Approves State Help for Medicaid and Education

Friday, August 6, 2010 at 2:50 AM by

Finally some very good fiscal news for states and schools! The U.S. Senate voted 61 to 39 Thursday to pass a deficit-neutral bill that provides funding to states for Medicaid relief and education. The House plans to take up the bill, H.R. 1586, next week, probably on Tuesday, August 10. Although House passage seems likely, it is by no means assured.

The bill is expected to save Wisconsin about $185 million in the state share of Medicaid spending, and our state should receive about $180 million for education. How the education funding will be used in Wisconsin is still unclear. The Medicaid relief will help the state close a large portion of the $300 million shortfall in the state share of funding for Medicaid and BadgerCare Plus.

A comprehensive WCCF report issued Thursday examines the role that enhanced federal Medicaid cost-sharing has played in helping Wisconsin cope with a huge drop in employer-sponsored insurance during the recession.  Read more

Categories: Blog, federal issues, food stamps, Medicaid, Recovery Act | Comments Off on U.S. Senate Approves State Help for Medicaid and Education

Stimulus Effort Creates or Saves 63,000 Jobs in Wisconsin

Wednesday, August 4, 2010 at 9:08 PM by

The American Recovery and Reinvestment Act (ARRA) created or saved between 2.5 and 3.6 million jobs as of the second quarter of 2010, according to a recent report by the Council of Economic Advisors (CEA). The report estimated that 63,000 of those jobs were in Wisconsin.

These jobs come at a time of high need for the state. Wisconsin’s unemployment rate, which stood at a seasonally adjusted rate of 7.9% in June, would almost certainly have been higher without Recovery dollars. How much higher is hard to know, but if the number of unemployed workers in the state rose by that figure of 63,000, our unemployment rate would jump to 10.0%. The state hasn’t experienced unemployment that high since the 1980s.

Nationally, the sum of outlays and tax cuts related to the Recovery Act was $480 billion as of the end of the second quarter of 2010, with an additional $147 billion obligated but not yet outlayed. Read more

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Senate Vote Delayed until Wednesday on Funding for Medicaid and Teachers

Monday, August 2, 2010 at 6:35 PM by

The U.S. Senate had scheduled a vote for late Monday afternoon (Aug. 2) on a bill that would provide Wisconsin an estimated $365 million, according to the State Budget Office.  However, the vote on that bill (HR 1586) has been delayed for a couple of days, because the Congressional Budget Office (CBO) said today that the costs exceed the offsets by $4.9 billion.  Senator Reid and others will take the next two days to recraft the package so it’s deficit neutral. 

Congress has been attempting for months to provide additional fiscal relief to states to avoid deeper cuts that would ripple through the economy and undermine the shaky economic recovery. However, the Senate has been unable to muster the 60 votes needed to break a filibuster of the bill.

Department of Health Services Secretary Karen Timberlake and Superintendent of Public Instruction Tony Evers held a conference call for the press on Sunday to draw attention to the Senate vote and to urge Wisconsin’s Senators to support the bill. Read more

Categories: Blog, EDUCATION, federal issues, food stamps, Medicaid, Recovery Act | Comments Off on Senate Vote Delayed until Wednesday on Funding for Medicaid and Teachers

Wisconsin Budget Project Publishes Article on W-2 Caseload Levels

Wednesday, July 28, 2010 at 2:56 PM by

Given the current economic situation, you might think that the W-2 cash caseload level would be at historic highs. If so, you’d be wrong.

Yes, the short-term picture shows an increase in caseload levels in each of the last three years. Yet the longer-range view reveals that the current caseload is a fraction of the level two decades ago. As shown in the chart, the recent increase in caseload doesn’t begin to make up for the precipitous drops in caseload that occurred over the 1990s.

Some low-income families are relying on other benefit programs instead of W-2. A recent article by the Wisconsin Budget Project published in the WisKids Journal compares the W-2 caseload increase to that of other public benefit programs, and discusses the fiscal impact of the increase in W-2 caseload.

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A Little Bit of Good Budget News !!

Friday, July 23, 2010 at 8:09 PM by

Wisconsin has gotten a string of bad news about its fiscal situation over the last two weeks, so I feel compelled to report on one bit of somewhat positive revenue news. The Dept. of Revenue (DOR) released June tax collection data this week, and their figures show that last month’s tax collections were 3.9% ahead of June 2009, bringing revenue for the full fiscal year very close to the projections made in January. 

For much of the 2009-10 fiscal year, which ended on June 30, tax collections trailed the 2009 level. However, the state closed the gap over the last few months. According to the latest DOR numbers, which aren’t quite the last word on the 2009-10 tax collections, the state finished the fiscal year $1 million below the previous year, a miniscule difference in state budget terms.

The last Legislative Fiscal Bureau projections from January of this year had assumed General Fund tax growth of about $19 million in 2009-10, so the state might be about $20 million short of the projection, but we’ll probably need to wait a month or so before we get a firmer picture of that. Read more

Categories: Blog, taxes | Comments Off on A Little Bit of Good Budget News !!

Significant Unemployment Benefits Victory, but What Comes Next?

Thursday, July 22, 2010 at 11:16 PM by

Thousands of Wisconsin families will sleep a little better after the Senate finally managed to approve a bill last night to extend unemployment insurance (UI) benefits for the long-term unemployed. The House approved the bill this afternoon and sent it to the President for his signature. Although passage of the bill is a huge relief for those families and will pump millions of dollars into communities across the state, the bill is also noteworthy for what it doesn’t include.

The final bill revives a program that provides up to 99 weeks of income support to those who have exhausted their UI benefits, immediately restoring aid to nearly 3 million people who have seen their checks cut off since the program expired June 2. According to statistics from the WI Dept. of Workforce Development, the change aids about 66,000 jobless Wisconsin workers who have lost this vital economic lifeline.

In order to pick up the votes needed to break a filibuster, Senate Democratic leaders had to shelve, at least for now, efforts to extend numerous other Recovery Act measures, including the following provisions for unemployed workers and state fiscal relief:
— The added $25 per week of UI benefits that was initiated by the Recovery Act and was in place until June 2. Read more

Categories: Blog, federal issues, Medicaid, Recovery Act, unemployment benefits | Comments Off on Significant Unemployment Benefits Victory, but What Comes Next?

Supreme Court Ruling Adds to Wisconsin’s Substantial Budget Challenges

Wednesday, July 21, 2010 at 12:43 AM by

The Wisconsin Supreme Court ruled today that the state must pay back the $200 million it transferred from the medical malpractice fund to help balance the 2007-09 budget. The 5-2 court ruling  sided with the arguments by the Wisconsin Medical Society that taking the money from the fund was unconstitutional.  The ruling adds to the substantial challenge Wisconsin will have in bringing the 2009-11 biennial budget back into balance.

The case now goes back to a lower court, which will implement the ruling. The lower court will determine how much interest the state must pay on the $200 million and will determine the repayment timetable, which some expect to be a gradual repayment schedule.

Today’s news adds to the state’s fiscal difficulties. As the Milwaukee Journal Sentinel reported last Thursday, Secretary Timberlake recently testified before the Joint Audit Committee that Wisconsin is likely to have a deficit of about $300 million in the state share of funding for Medicaid and BadgerCare Plus, and that could mean total state and federal cuts of as much as $850 million. Read more

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