I want to highlight two very interesting little stories that are quite valuable in how we can conceptualize our interactions with government and the social safety net.
First, the Wall Street Journal reports on how the IRS will deal with the ARA’s tax exemption of the first $10,200 in unemployment income:
News: Today the IRS updated its guidance on the new tax break for $10,200 of unemployment-payments.
The agency says it will automatically redo the taxes of people who already filed and send refunds–if any–starting in May. https://t.co/cggl7F3NFy
— Laura Saunders (@Saunderswsj) March 31, 2021
Secondly, Maryland is looking to expand the reach of their health insurance data sharing for outreach and enrollment purposes:
Groundbreaking bill moving forward in MD! HB1002, w/lead sponsors @LCharkoudian & @SenRosapepe, just passed Senate unanimously, soon going to governor. Lets UI claimants check box, share info with health exchange to get free or low-cost health insurance. First in US! pic.twitter.com/9lOm6gQFg3
— Stan Dorn (@standorn) March 30, 2021
Multiple levels of government have a whole lot of data on us. Multiple levels of government share a whole lot of routine financial data on residents who are accessing one part or another of the social safety net. Government bureaucracies know the eligibiltiy rules of various programs usually far better than the typical American as the bureaucracy is the organization that drafts the implementation rules and then builds up the knowledge by repeated doing of how things work while an individual citizen is often facing an interaction with little to no lived experience.
Shifting administrative burden to the state as described by Herd et al in a 2013 Public Administration Review article massively lowers transaction and hassle costs of accessing benefits that individuals are legally eligible for but may not have been able to navigate through a thicket of complex regulations, varying definitions of income and different redetermination periods.
Instead, a state can use the data that it already has through a triggering event such as filing and being determined eligible for an unemployment claim to connect individuals to the services that they are eligible for. The IRS is taking on the administrative burden of revising tax returns and likely sending out revised refunds instead of asking taxpayers to figure out a potentially complex tax change that occurred in mid-filing season. Maryland currently allows people to opt-in to a data sharing program between the state insurance marketplace and state tax authorities to increase health insurance enrollment. The proposed unemployment tickler is, again, in response to a mid-year change where anyone who is UI eligible for a week or more will be deemed to be earning 138% federal poverty level and thus eligible for a zero premium CSR-94 silver plan for the rest of the year.
Over the next several years, quite a bit of the Biden Administration’s efforts could conceivably be made on reducing administrative burden by having the professionally staffed entities that have deep subject area expertise and the relevant data interconnections share that data to make reasonable assumptions about comprehensive program eligibility and respond to unusual and odd circumstances on a systemic basis. I think states will be more likely to engage in these types of behaviors when the parts of the social safety net are mostly if not entirely federally funded but again, I think reducing administrative burden in the ACA markets is likely to have larger impacts than adding modest subsidies.
raven
Whoa!
guachi
IRS employees are going to need a big raise for all the mess the COVID bills have caused.
stinger
I’ve never understood why individuals have to fill out tax returns since the govt calculates it anyway and will send me a check/demand more payment based on ITS calcs and not mine.
Ken
@stinger: What I’ve heard is that the tax-prep and tax-software companies lobby heavily against having the IRS compute our taxes, and absolutely no one lobbies for the idea.
As a minor factor, they don’t have all the information for people who itemize, but I’d be willing to enter that much in an IRS website or app each year.
David Anderson
@Ken: Right, there is a strong lobby for complexity as that means paid help is needed.
I would bet that the IRS can do 80% of peoples’ taxes based solely on administrative data and get the amount within 1% or 2% of optimal.
That would be a massive win if everyone got a pre-populated 1040 with the option of accepting as is or updating with itemization and odd-stuff.
OzarkHillbilly
@David Anderson: Oooopps, repeat tweet up top.
TomatoQueen
Erm. As nobody who goes through the system understands the first time, or even the second, eligibility standards in federally-operated benefit systems are not all the same. First obvious example is the VA vs Social Security disability(my job). The VA disability standards, determination processes, and procedures are not the same as Social Security’s, in spite of what you’d like to think, and the one does not determine eligibility in the other (SSA spends a lot of energy on this). SSI and Medicaid are NOT portable from state to state (this causes a lot of trouble all the time, including death). The states may do their safety net stuff with some comparability, but in some cases, say New York vs Connecticut, rules and benefits are very different. As to data sharing–years ago SSA told NIH to fuck right off with their demands and assumptions about direct access to SSN data on the Master Death List. I’d like to see more reciprocity along the order of the Interstate Compact (child support), but it’s still going to be a heavy lift.
Cheryl Rofer
@David Anderson: And now we will have an example to point to of how the government can do our taxes for us.
stinger
@Ken:
Of course! Someone’s making money off it!
Another Scott
Good post and great points.
I always do our taxes, and I (somehow) usually end up calculating that we owe more than we do. (I blame J’s stock dividends and the convoluted capital gains stuff.) The IRS always refigures the taxes and makes adjustments that show up a few weeks later.
I think there’s even a check box on the 1040 form “I request that the IRS calculate my taxes for me” or some such. Of course, 90% of the work is collecting the data and putting it in the right places on the forms – not the math. But, still. The IRS has all the data except for the charity deductions, they should just do the figuring and paperwork for us automatically. As you say, the administrative burden on people is usually much more aggravating than the actual taxes.
Don’t get me started on the Virginia income tax form. If filing jointly, one has to figure taxes as a couple, then in order to claim a measly $259 credit for both taxpayers working, one has to figure the taxes for each individual separately. It’s infuriating…
Cheers,
Scott.
Cowboy Diva
There are a couple of challenges for universal automatic calculation of individual income taxes: there are a LOT of self-employed people in this country, and the IRS collects not only income taxes from them but also their FICA taxes. Quarterly tax payments help with that but those aren’t mandatory and even then there are industries (e.g., farming and fishing) where a year-over-year recalculation is allowed. The other joy of the IRC is the amount of social engineering that has been shoe-horned into it: the child tax credit and the earned income tax credit do a great deal to bring people (especially those with children) out of poverty, but let’s be honest. Giving away money is exactly the opposite of taking money, and asking one agency to do both can be schizophrenic, even before you suggest the computations be completely systemic. It doesn’t help that the same agency has to monitor due diligence for the rest of the federal government, and it’s easier to audit an individual claiming EITC/CTC funds than any tax liability determined by a member of the 1%, but that’s a different rant.
Omnes Omnibus
Not true. They don’t know filing status, number of dependents, medical expenses, or any about self-employment. In addition, they are unlikely to know the cost basis of any capital assets you might sell during the year (even if the proceeds are reported to them). That’s just off the top of my head.
Ken
But I’ll bet Virginia saves a lot of money, because people don’t bother claiming the credit.
Another Scott
@Omnes Omnibus: Well, if you want to get technical about it…
Cheers,
Scott.
dnfree
You’re not just the health coverage and policy guy, you’re also the administrative burden and friction guy.
David Anderson
@dnfree: My health insurance coverage work over the past few years is going into an administrative burden and behavioral economics perspective. I’ve definitely evolved over the past several years away from pricing uber-alles to a more nuanced view of the consumer choice process which means really getting into the weeds of choice structures and choice frictions.
Right now, I have 3 papers I’m working on at some stage of development that are pure behavioral econ, another couple of papers that are fuzzy on anything that resembles micro-foundations of economic behavior, and a lot of descriptive work on quality and market entry.
The work that has been deeply engaging to me (zero premium and dominated plans) are really admin burden and choice complexity papers. Those are fun :)
JaneE
When I retired my company provided Cobra information, and conversion information for my health insurance, one was expensive but no change to coverage and the other was cheaper but came with different benefits and co-pays. Using unemployment signups would do the same for temporary layoffs and offer cheaper coverage options with possible subsidies. I can’t see a down side for the person collecting benefits, and a lot of potential benefit. It must be socialism at work.
dnfree
@David Anderson: well, I for one am enjoying it!
David Anderson
@dnfree: This might be tomorrow’s post as putting together how my thinking has changed over time is likely to be valuable.