A few states are using bank debit cards to issue tax refunds if a taxpayer does not request that the refund be issued as a check or direct deposited to an account. A story in The Charlotte Observer, "S.C. tax refunds could take form as debit card," 2/24/12, notes that this could involve transaction fees for the users. The SC cards are issued by Bank of America and apparently if you only use the cards at merchants or BofA, there would be no transaction fee.
The state says this will save them money. A few interesting concerns raised in the article include how secure the cards are sitting in someone's mailbox and the form will encourage use for spending rather than paying debts.
The Connecticut Department of Revenue Services announced in January 2012 that it would be issued debit cards for tax refunds. Their website notes that security features are built into the cards.
Oklahoma also uses debit cards for tax refunds. The Oklahoma Department of Revenue has information on how to activate it and a set of FAQs to help people use them. The instructions note that there is an inactivity fee of $1.50 per month so holders should be sure to use the card at least once every 60 days. The card lasts for 3 years.
Sounds like a good idea to save the printing of checks, but it still involves the mailing of the cards and security issues. I think states can do more to assist its citizens who do not have bank accounts by setting them up and paying for them. Why not have the states use the mailing cost savings to help low-income taxpayers set up bank accounts? Would a state bank help? California is exploring this and North Dakota has had a state bank for some time. Can the state and employers help reduce tax refunds by adjusting paycheck withholding?
What do you think?
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| From CT Dept of Revenue Services website - http://www.ct.gov/drs/cwp/view.asp?A=1436&Q=498324 |
