Are You Aware of These Secret Taxes on the Poor?

Local and state governments having a hard time making ends meet are “quietly taxing a group even more cash-strapped than they are: the poor,” writes Leah A. Plunkett at Salon.

They do it by sending out bills to cover the costs of certain involuntary governmental services that are traditionally paid for through public taxes. When misdeeds or misfortunes occur, criminal justice or emergency services are triggered automatically. Once the service has been used, the government bills the user-turned-customer for the cost. As with any other service, if a payment isn’t made in full and on time, the customer’s debt can grow through the effect of interest, late fees or other penalties. Non or late payments may be reported to a credit bureau, and subsequent bad credit scores can make it difficult to get jobs, housing and loans.

This scheme hits the poor harder in two ways, Plunkett writes. First, they’re likely to have a difficult time paying the costs, which may mean they pay more money over time or experience other bad consequences if they can’t pay. Second, the poor are likelier to use certain types of services than wealthier citizens, so they’re now responsible for supporting services that used to fall to the community. The effect is a tax on poverty.

Here are four common types of “poor taxes,” according to Plunkett:

1. Emergency Response Services: A trip in the ambulance or a visit from the fire department can now result in bills for thousands of dollars. Some insurance plans will foot these bills, but not everyone has such good coverage — or any, for that matter.

2. Unemployment Benefits: Many workers who lose jobs are entitled to draw some support from state unemployment compensation funds to tide them over until their next job can be found. But states may make access to this money quite expensive when benefits are provided on debit cards with hefty fees attached that users have to pay.

3. “Pay-to-Stay” Programs: Counties nationwide are charging inmates for the cost of their own room-and-board while they’re in prison. Some counties are very aggressive about collection, pursuing inmates who don’t pay for years even after their release. Depending on the county, inmates may also be held responsible for other costs related to their own prosecution and punishment, such as reimbursing the government for the cost of their public defender — the lawyer appointed to represent them because they were found to be too poor to hire their own attorney.

4. Parental Reimbursement Programs: Parents of kids who get into trouble with the law are often required to foot the bill for the government’s attempts to rehabilitate their children. Attempts at rehabilitation can take many forms, including locking kids up in secure detention facilities. And when parents don’t make parental reimbursement required by courts, this failure can be grounds for being locked up themselves — and getting saddled with a “pay-to-stay” bill for their own time behind bars.

— Posted by Alexander Reed Kelly.