Governor Considers Snatching State Tax Refunds for Local Unpaid Bills

Mississippi is coming for your refund, and there seems to be no easy way to stop it. Legislators have already sent a bill to Mississippi Gov. Phil Bryant this month allowing county and municipal governments to direct the Mississippi Department of Revenue to garnish part or all of your state tax refund for certain debts, including things like water bills, unpaid local taxes, liens or trash collection fees. On top of the debt itself, the bill allows a 25 percent collection assistance fee to be levied.

These government debts will be heaped upon the list of things that the Mississippi Department of Revenue can already seize your refund for, including unpaid state student loans, community college fees and child support.

Under the language of HB 991, submitted by Republican Rep. Jeff Smith, of Columbus, a debtor has 30 days to contest the garnishment and nab a hearing in county circuit court. At that point, it comes down to how well you can sweet talk a judge, since Gov. Bryant has, so far offered, no opposition to the bill. If signed, the bill will become law in July.

Sen. Debra Dawkins, who voted against the bill in the Senate, said the law would be fairer in a world where everybody was in a position to afford a certified public accountant to wring out every financial advantage at tax time, to count assets and deductibles and grab tax loopholes. As it stands right now, the poor people (figuratively and literally) hardest hit by the snatch will have no expensive accountants to help counter it.

“Most people receiving refunds count on that money,” said Dawkins. “They use it for things like a much-needed home appliance, car repair or to pay a bill. If there’s an outstanding debt, they should indeed work on that, but the debtor should work that out through a reasonable payment plan. The legislature should not be making those decisions.”

Mississippi legislators appear eager to join a slew of states, and the federal government, in clawing back refunds for debt. In fiscal year 2015, the federal government grabbed $2.3 billion from borrowers, just to repay defaulted student loans. Most of that redirected cash came from federal tax refunds, according to a 2016 Government Accountability Office report.

National Consumer Law Center attorney Persis Yu explained in a 2018 report, Voices of Despair, that children are the biggest victims of seizures like the Earned Income Tax Credit, and others, because the largest payments usually go to families with children. The confiscation of these vital funds “can have a dramatic impact on children’s well-being,” she argued.

One source quoted in Yu’s report explained that he had been waiting desperately for his tax refund to pay rent and repair his car, and that when the government seized his refund due to old student loans it put him at risk of having to move his twin daughters into a homeless shelter, because he could not pay his back rent or get to work.

“I don’t understand how it is ethical or fair to make a family become homeless all because the Department of Education needs my $7,000 more than my children,” the source said.

Critics like Yu say hitting refunds is counterproductive since tax-time payouts have been a boon for reducing public dependence upon welfare. The Earned Income Tax Credit, alone, has been praised as the federal government’s most successful job creation and anti-poverty program, particularly in regard to encouraging workforce participation of single mothers. One study found that EITC expansions were responsible for more than 30 percent of the increase in employment among single mothers between 1993 and 1999; more effective even than welfare reform or a strong economy.

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