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You Can’t Satisfy Everyone

If you noticed last week’s stories about how the Internal Revenue Service delivered $1.4 billion of financial relief to dead people, consider this: Being a journalist, or a government fiscal watchdog, means never having to say “good job.”

It isn’t exactly a love story between the IRS and the public, or between most of the press and the current administration. Still, the headlines were unfair, and the Government Accountability Office report on which they were based could fairly be described as nitpicky, Monday morning quarterbacking.

On the same day President Trump signed the legislation promising $1,200 each to most American adults and $500 for most children, the IRS – handed the task of delivering these funds ASAP – sent virtually all its employees home, to telework as much as possible. Yet the agency still managed to start the money flowing in just a few weeks. It has delivered more than $269 billion in fiscal aid overall, seemingly with 99.5% accuracy.

Under the circumstances, “good job” hardly seems enough. We could at least add a big “thank you” to the human beings who made it happen. They did it while working from home in the middle of a pandemic that was as weird and frightening for them as it was for everyone else.

This was yeoman service to the country from an agency that is chronically understaffed, under-resourced and underappreciated, considering how vital its function is to the government. And that service was desperately needed.

Tens of millions of Americans were thrown out of work when the pandemic forced a near-nationwide, large-scale lockdown in the final weeks of March. Claims overwhelmed many state unemployment offices. Yet Americans still needed to pay rent and feed their families. A large segment of the population lives paycheck to paycheck; for many, those paychecks had stopped coming. Some in Congress referred to the vast relief bill known as the CARES Act as a wartime measure. In wartime, do you criticize the Air Force if one bomb out of 200 misses its target?

I don’t think so. Yet, with the luxuries of ample time, full bellies and often their own comfortable work-from-home arrangements, journalists focused on the errant payments that were inevitable under the circumstances.

The stimulus payments are technically credits against 2020 income taxes. But the Service had to base them on income data from taxpayers’ 2018 or 2019 tax returns, depending on what was available to the IRS at the time. The hastily drafted legislation was unclear about how to handle taxpayers whose 2020 income puts them above the eligibility cutoff, or whose 2019 tax data (which may not be filed until October 2020 under extensions) shows higher income than the 2018 figures the IRS used. The current interpretation is that none of the relief needs to be repaid in these circumstances. Stay tuned, though – the rules on this and other aspects of the emergency relief package, notably the Paycheck Protection Program for businesses, have been a moving target since enactment.

Similarly unclear was how the IRS should treat people who filed 2018 or 2019 tax returns but have since died. At first, the Treasury said the heirs of those taxpayers were entitled to keep the money. Then it said they weren’t. Treasury Secretary Steven Mnuchin seems to be making up rules as he goes along, based largely on what catches the eye of headline writers.

For its part, the GAO observed that “IRS has access to the Social Security Administration’s full set of death records, but Treasury and its Bureau of the Fiscal Service, which distribute payments, do not. GAO recommends that Congress provide Treasury with access to the Social Security Administration’s full set of death records, and require that Treasury consistently use it, to help reduce similar types of improper payments.”

The relief payments were not only a lifeline for the households that received them; they were a key support for the national economy – as Congress intended. Even as household spending collapsed during the April lockdown, personal income increased more than 10%, thanks largely to the stimulus payments and the federally augmented unemployment benefits that gradually began flowing. This, in turn, led to a surprising jump in economic activity in May that has continued through most of June.

Still, the economy remains in a very bad place compared to four months ago, and new storm clouds are gathering. An upswing in new cases of COVID-19 in big states including California, Texas and Florida could prevent some workers who have benefitted from the federally boosted unemployment benefits from returning to work after those benefits revert to normal, which is currently scheduled to happen in August. Already, California’s Disneyland has postponed plans to reopen amid union opposition and government reticence. On Friday, Texas Gov. Greg Abbott ordered bars to close and limited outdoor gatherings.

Momentum seems to be building toward passage of a second round of financial relief for households, as well as for hard-hit state and local governments. The administration has signaled support for another round of payments like the ones that went out this spring. Democrats are pushing for a six-month extension of the $600 weekly federal boost to state unemployment benefits, under which many workers are better off staying home than going back to their jobs. That would probably be a death blow to many of the businesses that have managed to survive thus far. Giving households money to spend is going to produce a stronger, broader recovery than paying workers not to work.

The IRS will have its chance to implement the GAO’s recommendations if Congress calls on the Service to distribute another round of financial relief. In that event, less money will go to dead people, but the system still will not be perfect. Nothing ever is. That’s what keeps the watchdogs in business and the headline writers happy.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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