Congress Failed to Make Cash Assistance Universal. Now Local Governments Must Step Up

This piece is a commentary, part of The Appeal’s collection of opinion and analysis.

Last week, Congress passed—and President Trump signed—a massive economic stimulus law that includes significant aid for people residing in the United States. Over the coming weeks, the Internal Revenue Service (IRS) will distribute up to $1,200 per individual, and more for families with children. Cash assistance will help millions of people to pay rent and buy groceries in this time of economic insecurity and rising unemployment.

But Congress failed to make the cash assistance universal. With some exceptions, you must be a tax-filer to get this help, and that will leave behind many of the people who are most vulnerable. Many low-income people, homeless people, and incarcerated people risk receiving no cash assistance from the U.S. government—despite qualifying for it.

It is now incumbent on local and state governments to step up and fill this yawning gap in the federal stimulus by proactively reaching out to help as many people as possible receive aid.

At the heart of the problem is that the law allows the IRS to distribute credits only to U.S. residents who have filed taxes in 2018 or 2019 and have a Social Security number, or to people who receive Social Security benefits (mainly older Americans and people with disabilities)—with small exceptions, such as for people who are in the armed forces.

Tens of millions of U.S. residents—about 12 percent of the U.S. population, according to one study—do not file tax forms, however. And they are the nation’s most needy.

Many have good reason not to file.

Some simply are not required to because of their low incomes. Non-senior single individuals who make less than $12,200, or heads of household who make less than $18,350, for example, are exempt from sending income information to the IRS. A single parent making federal minimum wage and working 45 hours a week would fall into that category.

Some don’t file because they are unhoused. For homeless people, filing taxes without an address to receive mail is a challenge, especially if they’re hoping to receive a tax rebate.

Others are incarcerated. People in prison have no incentive to file taxes since the meager incomes they earn in prisons do not qualify for federal tax assistance like the Earned Income Tax Credit and the Child Tax Credit.

The good news is that 2019 tax filings are not due until July 15, 2020. So people who file taxes in the coming four months can still receive assistance. This is an unnecessary burden since the federal government could have written a law whose benefits reached more people.

Still, at this point, we have an opening to make the stimulus package be as universal as possible.

Making the most of this opening requires local and state governments, and the nation’s network of social service providers, to make it a priority to encourage and help people file returns.

The infrastructure to begin this work already exists. Some jurisdictions have built tax-assistance programs. For example, the city of Chicago and the Food Bank For New York City offer free tax-filing aid for low-income households through the federally supported Volunteer Income Tax Assistance Program. An awareness campaign from the federal government—included in the law—could also play an important role in getting the word out.

Unfortunately, because of COVID-19, many of those programs have ceased operations until further notice. But they are needed now more than ever.

Cities and states should use television, web, and billboard advertising to emphasize the benefits of tax filing. They should also reach out proactively to individuals to provide forms, explain the situation, and walk them through filing, either in the mail or online.

In particular, local governments and aid providers should work directly with homeless residents, first to identify an address they can use to file a return. Allowing them to use city or social service offices as their home addresses will ensure they can receive a check. Agencies already working with homeless people to relocate them into emergency dwelling units and to provide emergency meals should simultaneously provide tax assistance.

Correctional officers and sheriffs, similarly, should engage in outreach in prisons and jails to incarcerated people, people awaiting trial, and people being released. Many departments of corrections provide tax materials, though it’s unclear if they are doing so during the current crisis.

The Treasury Department is developing a “web-based system” to allow tax filers to enter bank account information; agencies should work with the federal government to leverage this tool to allow cities and agencies to serve as financial intermediaries for people without bank accounts.

Doing all of this safely will require careful planning—but the impact could be dramatic for families living paycheck-to-paycheck. It would also be a win-win for local governments; a few minutes helping a homeless person file for cash assistance could eventually result in $1,200 more spending in the local economy.

There would also be hidden benefits to such initiatives. Many who qualify for programs like the Earned Income Tax Credit and Child Tax Credit do not file taxes. If they file this year, they could unlock not only the stimulus’ cash assistance, but also those other benefits—a huge boost for many.

For example, the single parent with one child making federal minimum wage and working 45 hours a week I mentioned before could qualify for about $5,000 in federal tax credits, even before the additional $1,200 comes into play.

Even if local and state governments do this work, some problems remain insurmountable. The roughly 10 million undocumented people who live in the U.S. won’t get assistance because they lack Social Security numbers. Even those who file income taxes won’t, because the tax identification numbers they use do not qualify them for assistance.

Importantly, there are additional measures in the stimulus law for the most vulnerable people in the U.S. Among other elements, it includes $12 billion specifically for low-income housing relief, of which a third will go to grants to address homelessness. It also includes $25 billion for public transportation, providing essential mobility for people without access to cars.

We’re a long way, however, from a universal cash benefit that protects the most needy. Until the federal government steps up to help everyone, our local governments and social services agencies can begin to make up the gap by working to identify and engage those who need a little help filing taxes, and get them the aid they need to unlock cash assistance.

Yonah Freemark is a Ph.D. candidate in the MIT Department of Urban Studies and Planning.