Master your Minecraft
 
 

Special Offers see all

Enter to WIN a $100 Credit

Subscribe to PowellsBooks.news
for a chance to win.
Privacy Policy

Tour our stores


    Recently Viewed clear list


    Original Essays | November 7, 2014

    Carli Davidson: IMG Puppies for Sale? Read This First



    Shake Puppies contains an almost unsettling amount of cuteness. There is a good chance after looking through its pages you will get puppy fever and... Continue »

    spacer
Qualifying orders ship free.
$7.50
List price: $16.00
Used Trade Paper
Ships in 1 to 3 days
Add to Wishlist
Qty Store Section
1 Beaverton Politics- Labor
4 Burnside American Studies- Labor and Work

The Working Poor: Invisible in America

by

The Working Poor: Invisible in America Cover

 

 

Excerpt

Chapter One

Money and Its Opposite

You know, Mom, being poor is very expensive. —Sandy Brash, at age twelve

Tax time in poor neighborhoods is not April. It is January. And “income tax” isnt what you pay; its what you receive. As soon as the W-2s arrive, working folks eager for their checks from the Internal Revenue Service hurry to the tax preparers, who have flourished and gouged impoverished laborers since the welfare time limits enacted by Congress in 1996. The checks that come from Washington include not only a refund of taxes withheld, but an additional payment known as the Earned Income Tax Credit, which is designed to subsidize low-wage working families. The refunds and subsidies are sometimes banked for savings toward a car, a house, an education; but they are often needed immediately for overdue bills and large purchases that cant be funded from the trickle of wages throughout the year.

Christie, a child-care worker in Akron, earned too little to owe taxes but got $1,700 as an Earned Income Credit one year, which enabled her to avoid the Salvation Armys used-furniture store and instead buy a new matching set of comfortable black couches and loveseats for her living room in public housing.

Caroline Paynes check went for a down payment on her house in New Hampshire. “I used my income tax and paid a thousand down,” she said proudly. When she sold it five and a half years later and her daughter lent her money to rent a truck for her move, she planned to pay her back “when I get my taxes.”

“Im waitin for my income tax to come in so I can pay my real estate taxes,” said Tom King, a single father and lumberjack who lived in a trailer on his own land.

Debra Hall, who had started at a Cleveland bakery, was keen with anticipation after filing her first tax return. “Ill get $3,079 back! What am I gonna do with it? Pay all my bills off,” she declared, “and I havent had anything new in the house. Do some good with it, thats for sure. Minor repairs on my car. The bills are first, for my credit [rating], to get all my back debts paid. It will be well spent.”

The Earned Income Tax Credit is one of those rare anti-poverty programs that appeal both to liberals and conservatives, invoking the virtue of both government help and self-help. You dont get it unless you have some earned income, and since its payments are linked to your tax return, you dont get it unless you file one. That leaves out low-wage workers—especially undocumented immigrants—who get paid under the table in cash and think theyre better off avoiding the IRS. By filing, however, they would end up ahead, because theyd get to keep everything they earned and would receive a payment on top of that. The benefits kick in at fairly high levels—at earnings of less than $33,692, for example, for a worker who supported more than one child in 2003. At the lower income levels, the Earned Income Tax Credit can add the equivalent of a dollar or two an hour to a workers wage.

Enacted in 1975, the program was expanded under Presidents Reagan, Bush, and Clinton, and in 2003 paid more than $32 billion to 18 million households. Treasury officials worry about erroneous claims, honest or fraudulent, which may rise to 27 to 32 percent of the total.1 On the other hand, an estimated 10 to 15 percent of those eligible dont file for it,2 partly because employers and unions often dont tell workers that it exists. The presidents of two local unions in Washington, D.C., for example, one representing janitors and the other parking garage attendants, had never heard of the Earned Income Tax Credit until I mentioned it to them. And I have not yet come across a single worker or boss who knew that with a simple form called a W-5, filed with the employer, a low-wage employee could get some of the payments in advance during the year. When I mentioned the W-5 to Debra Hall and she then asked at her bakery, the woman who handled the payroll waved her away impatiently and said she knew nothing about it. Later, the tax preparer told Debra it was better just to wait and get the payment in one lump sum after she filed her return.

It sure is better—if youre the preparer. With cunning creativity, the preparers have devised schemes to separate low-wage workers from as much of their refunds and Earned Income Credits as feasible. The marvel of electronic filing, the speedy direct deposit into a bank account, the high-interest loan masquerading as a “rapid refund” all promise a sudden flush of dollars to cash-starved families. The trouble is, getting money costs money.

The preparers operate from sleazy check-cashing joints and from street-level outposts of respectable corporations. They do for a hefty fee what their clients could do for themselves for free with the math skills and the courage to tackle a 1040, or with a computer and a bank account to speed filing and receipt. But most low-wage workers dont have the math, the courage, or the computer, and many dont even have the bank account. They are so desperate for the check that they give up a precious $100 or so to get everything done quickly and correctly. “You get so scared,” said Debra Hall, who paid $95 to have her simple return done after ending twenty-one years of welfare. “I dont know why its so scary, but Id rather have it done right the first time.”

She was probably wise, because another disadvantage of being poor is that youve been more likely since 1999 to face an audit by the IRS. In that year, 1.36 percent of the returns filed by taxpayers making under $25,000 were audited, compared with 1.15 percent of those making $100,000 or more. The scrutiny was instigated by Republican congressional leaders who feared abuses of the Earned Income Tax Credit. In the face of bad publicity, the IRS shifted the balance in 2000 by auditing 0.6 percent of those under $25,000 versus 1.0 percent of those over $100,000. Thereafter, the audit rate tilted back and forth, to .86 and .69 percent, respectively, in 2001, then to .64 and .75 in 2002.3 In other words, as the IRS lost enforcement personnel, it dramatically reduced its scrutiny of well-to-do taxpayers, whose returns were once audited at the rate of 10 percent. This despite the fact that audits at the upper levels of income naturally tend to recover more dollars in lost revenue.

Evon Johnson never dared do another return herself after the IRS charged her $2,072 in taxes, penalties, and interest. Newly arrived from Honduras, she was working from 5 a.m. for a cleaning service in Boston that never withheld taxes and never sent her a W-2. She didnt know they were supposed to do either. “I did my taxes, I fill it out, fine,” she said. But not so fine, evidently. “Three years after or four years after, IRS contact me saying that I owe them . . . like, $2,072. ‘Why do I owe you? And they say: because I didnt declare my taxes. I say I did. . . . They say no. . . . I sent them a letter saying I was sending them $1,072 I think it was, cause I didnt have no money at the time, and I was going to make small installments for the rest of the money. . . . You know what they did? I had a bank account, and they took the money from my bank account—every penny I had.” Ever since, she has happily paid $100 a year to a tax preparer, $100 a year for peace of mind. “I dont want the IRS back on me,” she explained. “He do it and he sign it and put everything, so if any mistake, he gonna be the one who will have to deal with them.”

By the end of February, H&R Blocks storefront office on a dismal stretch of Washingtons 14th Street looked like a well-used campaign headquarters a week after Election Day. Most computer screens were dark, and the place was quiet and cavernous. All the desks were empty but one, occupied by Claudia Rivera, who used to prepare returns without charge at a library in Virginia. She and the manager, Carl Caton, didnt have much to do now that the rush had passed, so they were happy to sit at a keyboard and explain.

Each form the taxpayer needed carried a fee: $41 for a 1040, $10 for an EIC (the Earned Income Credit), $1 for each W-2, and so on. Electronic filing cost another $25. So a simple return with two W-2s filed electronically would run $78. But it didnt stop there. Block had a smorgasbord of services for people who lived on the edge. If you had no bank account, your refund could be loaded onto an ATM card that charged $2 per withdrawal. Or a temporary account could be opened into which the IRS payment could be deposited for a fee of $24.95. If you were enticed by Blocks offer of a “rapid refund” and wanted a check in a day or two, you paid H&R Block an additional $50 to $90, depending on the amount you were getting. The fee on 14th Street could be as much as $50 on a $200 refund, up to $90 for $2,000 or more.4

This was actually a loan, and for a very short time. Filing electronically usually gets you a check in two and a half weeks, according to the IRS, and five days sooner if its deposited directly into a bank account. At the most, then, the “rapid refund” loan, issued a day or two after filing, would run about fifteen days, which made the $90 fee on a $2,000 payment equivalent to an annual interest rate of 108 percent. At the least, the loan could run as little as four days, propelling the annualized rate to 410 percent on $2,000, and 2,281 percent on $200. (The highest percentage is incurred if the timing occurs perfectly: the return is filed by the IRSs weekly deadline of noon Thursday, the loan check is not issued until after banks close Friday, the taxpayer cant put it into his account until Monday, and the IRS is fast enough to deposit the refund directly with the lending bank the following Friday.)5

After a spate of lawsuits, a federal judge in Norfolk ordered Block to stop using the misleading term “rapid refund” in advertising loans, but Block continued with the ads by redefining “rapid refund” as a reference to electronic filing only. The company called its loan program a “refund anticipation loan,” a distinction lost on many of the low-wage workers who ventured into Block offices in search of a rapid refund. In 2000 such loans went to 4.8 million taxpayers.

Among all the working people I interviewed who used the loan service, not one understood the terms or the options. Hector and Maribel Delgado, who earned about $28,000 a year picking and packing vegetables in North Carolina, were stunned when I sat with them in their trailer, looked over their tax return, and explained how it all worked. They had paid Block $109 to prepare their return, file it electronically, and give them an advance on their payment from the IRS of $1,307.05. The form they had signed disclosed a finance charge of 69.888 percent annually, but they had not understood it. Even as Block employees presented a contract in fine print, they were trained to avoid the word “loan,” and say “two-day refunds” instead, a Maryland judge found in hearing a lawsuit on the lending practices. And the refund loans were lucrative enough to provide 8 percent of Blocks entire profits in 1999, mainly because a Block subsidiary owned a 49.99 percent interest in the loans, made by Household Bank.

Something else illicit happened to the Delgados in the Block offices. Although they filed electronically in January, a time when the IRS promises checks within a couple of weeks, “We were told wed have to wait six to eight weeks,” Maribel said. This was patently false. “We needed the money to pay bills,” she explained. “We send one part to Mexico, another part to here. We usually send $100 every two weeks to Mexico. We have a big family.”

In 2000, after facing a decade of class-action lawsuits alleging misleading lending practices, H&R Block agreed to a $25 million settlement without admitting any wrongdoing. The only practice the company changed was to present the federally required truth-in-lending disclosures earlier in the process, according to a spokeswoman. Do employees at least explain the terms verbally? “A lot of it depends on questions customers ask,” she said. “If they ask questions, preparers are supposed to answer.” Many customers simply do not know what questions to ask.

Poverty is like a bleeding wound. It weakens the defenses. It lowers resis- tance. It attracts predators. The loan sharks operate not only from bars and street corners, but also legally from behind bulletproof glass. Their beckoning signs are posted at some 10,000 locations across the country: “Payday Loans,” “Quick Cash,” “Easy Money.” You see them in check-cashing joints and storefront offices in poor and working-class neighborhoods. They have organized themselves into at least a dozen national chains, and they charge fees equivalent to more than 500 percent annualized interest.

They also provide a much needed service. Say youre short of cash, and the bills are piling up, along with some disconnection notices. Payday is two weeks away, and your phone and electricity will be shut off before then. The guy at the local convenience store, who has a booth for cashing checks, throws you a lifeline. If you need $100 now, you write him a check for $120, postdated by two weeks. Hell give you the $100 in cash today, hold your check until your wages are in your bank account, and then put the check through. Or you can give him the $120 in cash when you get it, and hell return your check. Either way, 20 percent interest for two weeks equals 1.428 percent a day, or 521 percent annually.

If youre still stuck after payday, if your paycheck doesnt quite cover your needs, or if your check for $120 bounces, no problem. The guy behind the bulletproof glass will gladly roll over your loan—for another $20. This pattern prevails in Illinois, for example, where state examiners found that rollovers made up 77 percent of all payday loan transactions. The average customer had ten such renewals, which meant paying fees totaling up to twice the amount borrowed.6 Eventually, you may have to borrow from another payday loan merchant to pay the fees at the first. And so on and on and on.

What Our Readers Are Saying

Add a comment for a chance to win!
Average customer rating based on 2 comments:

forslar, January 1, 2011 (view all comments by forslar)
This book is the most intriguing and important I've ever read. Shipler investigates the lives and conditions of the working poor from a wide swath of American life both geographically, ethnically, situationally. The real people populating his writing made it clear to me that even I, a confirmed liberal, harbored many misconceptions about the poor in America, who they were, how they came to be that way, what it would take to get them out of this situation. This is a book that should be required reading in all schools and of all people before they set out to vote or participate in any way in our shared life.
Was this comment helpful? | Yes | No
(2 of 4 readers found this comment helpful)
Yves, January 10, 2010 (view all comments by Yves)
I have been a Physician for over 20 year and during the these two decades I have dedicated most of my work to take care of the poor. For the last 8 to 9 years I have given lectures on poverty and cultural competency to hundreds of participants to Doctors, Nurses, social workers, administrators and alike. I have cited this book in every single one of my lectures. This book explains in a well written fashion what my message is. I have advised every single one of the attendants to my lectures to read this book and I have given away several copies. This book is a real "eye opener" for people to understand the barriers that the poor face every day.
Was this comment helpful? | Yes | No
(4 of 9 readers found this comment helpful)
View all 2 comments

Product Details

ISBN:
9780375708213
Author:
Shipler, David K
Publisher:
Vintage
Author:
Shipler, David K.
Subject:
Sociology - General
Subject:
Finance, personal
Subject:
Poverty
Subject:
Social classes
Subject:
Poor
Subject:
Labor & Industrial Relations - General
Subject:
Poor -- United States.
Subject:
Debt -- United States.
Subject:
Sociology-Poverty
Subject:
poverty;sociology;non-fiction;economics;politics;labor;america;working poor;cultural studies;social justice;poor;inequality;current events;current affairs;social class
Subject:
economis inequality;poor;poverty;poverty in america;poverty line;trickle down;racism;welfare;minimum wage;antipoverty;current affairs;current events;banned book;social justice;labor;economics;american studies;cultural studies;bankruptcy;food stamps
Copyright:
Edition Description:
Trade paper
Series:
Vintage
Publication Date:
20050131
Binding:
TRADE PAPER
Grade Level:
General/trade
Language:
English
Illustrations:
Y
Pages:
352
Dimensions:
8.08x5.24x.76 in. .56 lbs.

Other books you might like

  1. Random Family: Love, Drugs, Trouble,...
    Used Trade Paper $5.50
  2. Our America Life and Death on the... Used Trade Paper $5.95
  3. Suburban Nation: The Rise of Sprawl... Used Trade Paper $7.50
  4. The Omnivore's Dilemma: A Natural...
    Used Trade Paper $7.95
  5. Celebration, U.S.A.: Living in... Used Hardcover $7.95
  6. There Are No Children Here: The...
    Used Trade Paper $4.50

Related Subjects

Business » Human Resource Management
Business » Management
Featured Titles » History and Social Science
History and Social Science » American Studies » 80s to Present
History and Social Science » American Studies » General
History and Social Science » Economics » General
History and Social Science » Politics » Labor
History and Social Science » Sociology » General
History and Social Science » Sociology » Poverty
History and Social Science » Sociology » Social Classes
Sports and Outdoors » Martial Arts » General
Sports and Outdoors » Sports and Fitness » Martial Arts » General

The Working Poor: Invisible in America Used Trade Paper
0 stars - 0 reviews
$7.50 In Stock
Product details 352 pages Vintage Books USA - English 9780375708213 Reviews:
"Staff Pick" by ,

The Working Poor is a deeply impressive book, a thorough and balanced study of the millions of Americans living at or around the poverty line. Shipler's varied portraits and interviews are insightful and moving, and his analysis of causes and suggestions for plausible change left me with genuine hope.

"Review" by , "A damning report on poverty in America....A sobering work of investigation, as incisive — and necessary — as kindred reports by Michael Harrington, Jacob Riis, and Barbara Ehrenreich."
"Review" by , "This guided and very personal tour through the lives of the working poor shatters the myth that America is a country in which prosperity and security are the inevitable rewards of gainful employment."
"Review" by , "Shipler fleshes out statistics and social policy with compelling portraits of people who struggle to maintain lives for themselves and their families....This is a compelling, insightful book for those interested in issues of poverty and social justice."
"Review" by , "The Working Poor is a powerful exposé that builds from page to page, from one grim revelation to another, until you have no choice but to leap out of your armchair and strike a blow for economic justice." Barbara Ehrenreich, author of Nickel and Dimed
"Review" by , "Through a combination of hard facts and moving accounts of hardships endured by individuals, David Shipler's new book fills in the gaps and denounces the many myths of the politically drawn caricatures and stereotypes of workers who live in poverty in America. His call to action powerfully argues that we must simultaneously address the full range of interrelated problems that confront the poor instead of tackling one issue at a time. It is a compelling book that will shift the terms of and reinvigorate the debate about social justice in America."
"Review" by , "[A] powerful new book....Clearly one of those seminal books that every American should read and read now."
"Synopsis" by , From the author of the Pulitzer Prize-winning Arab and Jew comes a new book that gives a searing, intimate portrait of working American families struggling against insurmountable odds to escape poverty.
spacer
spacer
  • back to top

FOLLOW US ON...

     
Powell's City of Books is an independent bookstore in Portland, Oregon, that fills a whole city block with more than a million new, used, and out of print books. Shop those shelves — plus literally millions more books, DVDs, and gifts — here at Powells.com.