Your Tax Dollars at Work: $42 Million Just to Mail Out Tax Rebate Reminder Letters

It doesn’t matter where you fall on the political spectrum, but you probably understand that government spending can be incredibly wasteful. There isn’t a better example than this mailing about to go out from the IRS just to inform people that they might be getting a rebate check later this year. That’s right, the IRS plans on sending out over 130 million letters to taxpayers doing nothing more than announcing the rebate, and reminding people that they need to file a 2007 return in order to be eligible.

And this is just the beginning. The first 130 million letters are going out to those who filed a 2006 return and could possibly be eligible. Still to come are more letters that will be sent out to retirees who receive only social security benefits and some veterans who don’t normally file returns. There isn’t a number available yet, but you can expect that to run into the many millions of dollars as well.

Is This Mailing Really Needed?

It depends on who you ask, but Keith Hennessey, the director of the president’s National Economic Council thinks so. He argues that these reminders are needed so that people don’t get confused:

Any time you do something as a government tens of millions of times, there is ample room for people to get confused. And so if you’re going to have tens of millions of taxpayers getting checks, you want to get the information out so that you have as few people as possible confused about what’s happening, they understand what’s coming, and it reduces the number of incoming requests that IRS and Treasury have to figure out how to deal with it.

At first glance, yes, this can make some sense. With so many tax scams going on out there, and since we’re telling people to be wary of attempts for people to trick you into getting your personal information, it might seem reasonable to notify people that a check will be coming in the mail. But, is sending a letter to all taxpayers really the answer?

How many taxpayers are completely oblivious to this tax rebate? Could you walk down the street of any city in this country and randomly poll people and find that 50% had no idea there was going to be a rebate? 30%? 20%? I’m willing to bet that a very small percentage of people who actually file a tax return are completely unaware of at least the notion of some sort of rebate check coming and would need a reminder. Of course, this is America, and it seems as if more people are concerned with whether or not Britney Spears is having a mental breakdown than anything remotely relevant.

How $42 Million Could be Better Spent

Burning MoneyIf we’re talking about wasting $42 million on a bunch of mailings that will do nothing more than go directly into trash cans, how could this money be better spent elsewhere? I don’t know about you, but I don’t think this country is perfect. Schools are underfunded, we have poverty and hunger here in the wealthiest nation in the world, drug and crime problems, and even disease. Would a mere $42 million solve these problems? Of course not, but it would be far better spent than on millions of pieces of paper going through the mail.

We shouldn’t forget that we already have a massive deficit, weak dollar, and are moving towards a recession, but clearly the the $42 million cost is justifiable. Yes, that was sarcasm. This shotgun effect is simply throwing millions of dollars away. Out of the 130 million mailings or so, how many of these will actually show a return on investment? One million? Five million? Less? Sure, a few people may actually benefit from this reminder mailing, but it is a guaranteed loss. If you were a business, would you spend $42 million just to recover $2 million on on that investment? Of course not, but this is “free” money provided by taxpayers, so what the hell–who cares if we only recover a small fraction of this “investment.”

Your Thoughts

I’m curious to see how you feel about this. Do you think it is a justified expense? Could this money be better used elsewhere? If you could allocate this money elsewhere, where would you put it? I’m sure there are plenty of opinions out there, and it should be interesting to see the different points of view.

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Filed Under: Taxes

About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.

26 comments
Kris B
Kris B

Why didn't they simply enclose the letter exlaining the rebate WITH the rebate? Save a good bit on postage and the receiving party still gets their "explanation".
Waste of money, this separate letter.

Beyond Paycheck to Paycheck
Beyond Paycheck to Paycheck

It just gets better:

From today's WSJ:

Congress gave the IRS more than $200 million to cover costs, mainly postage and handling. But there have been other significant costs. For example, the IRS has moved hundreds of enforcement staffers from their regular work to help answer phone calls, resulting in up to $565 million in forgone enforcement revenue, said a recent report by the U.S. Government Accountability Office, a congressional agency.

April
April

Yes, Jeannette - but then you will have to pay taxes on the interest you made! Why should I have to pay taxes on interest that is from money I have ALREADY paid taxes on. Maybe lawmakers should take a look at ways to encourage savings, starting with dropping this tax (at least with a reasonable cap). Our economic trouble, in part, stems from living beyond our means.

April
April

Americans need to take a stand. Really think about how much money you pay in taxes and then how the government wastes money on programs. Maybe if Americans had to write a monthly or quarterly check for their taxes instead of being taken out of their paychecks they would realize how much they pay and there would finally be a revolution. We pay how much and still cannot provide universal healthcare?

April
April

This $42 million could have been put to some actual use. It could have fed over 100,000 families in the U.S. for a month, could have paid a full ride scholarship to a good University for at least 500 students . . . That makes me almost as mad as the fact that people who have already made a profit off of their taxes are also receiving this money. This is a rebate, if you don't pay you should not receive.

Jeannette
Jeannette

Don't even get me started on what a waste this "rebate" is. While it's supposed to "stimulate the economy", I'll be saving mine, and besides, 600 bucks a person isn't going to make that much difference in the big picture. It's like putting a bandaid over a gaping wound.

So I won't be complaining about getting money from the government, I sure as hell won't be spending it. If the Democrats do get the White House you can be sure taxes will rise to "cover" the cost of a jillion government funded relief programs that it can't afford. I fully expect to have to give the entire check BACK to the IRS. At least I'll get the interest from saving or investing my check.

Beyond Paycheck to Paycheck
Beyond Paycheck to Paycheck

Looks like $42M was just for round one. About a week ago, my Congressional representative, presumably lacking confidence that I would have understood the original IRS mailing, spent who knows how much to send me a different version with the same info.
Of course this one was in color and had her picture on it. This of course made it much easier to comprehend. But then again, it didn't say "Do Not Throw Away" like the original IRS version.

Will there be a round three, perhaps from the Bureau of Engraving and Printing?

Jeff Nethercot
Jeff Nethercot

I appreciate the authors for taking the time to speak up about yet another instance of wasted taxpayer dollars. Tack the $42M onto what amounts to a future generation tax.

Career politicians touting good intentions with no appreciation for unintended consequences. When will we rise up and reverse this trend? On a side note, is it true that people in Congress are STILL on their own health insurance system at no cost to them (but of course, to us)?

H_Roarke
H_Roarke

Either it's bad:
"I agree that $42 million is a waste. In fact, I think the entire tax rebate is a waste, paid for by future generations."

Or, it's good:
"If that’s their goal and it works, you could argue that it’s $42 million well spent."

Think for yourself and pick one please.

Huffles
Huffles

The government's plan is to stimulate the economy by increasing spending by consumers as quickly as possible. I agree that $42 million is a waste. In fact, I think the entire tax rebate is a waste, paid for by future generations. However, the government may "stimulate" a million people to spend their $600 TODAY, rather then after they receive their check. If that's their goal and it works, you could argue that it's $42 million well spent.

ikie12pts
ikie12pts

Franklin was so right. We DESERVE the government we get. We allow the politicians to lead us around by a hook in our noses and never do anything about it. This country is composed of sheep!!!!!

H_Roarke
H_Roarke

"Sounds like Democrat handholding…I bet the Dems wrote the reminder mailing into the bill."

Not being either (Dem or Rep) this is what completely irks me about "supporters" of both parties. You have no idea if it was Democrats or not. If it was, fine, complain about them, but at least do the research to determine if they did it or not. Your "belief" doesn't matter at all. What we do know, is that the current President started this idiotic rebate.

"Yeah I think this is wasteful (but typical of the government). Here’s what I don’t get. Say this year I do my taxes and find I owe $600 in taxes. So I fill out my return and pay the $600. Then later I get a refund of $600. So ultimately it’s a wash, and surely money is wasted taking my check and sending me one in return."

This is all true, but the $600 seperate check makes the average fool seem richer, and thus more willing to spend the $600. Again, we are trying to create a negative savings rate. They are also trying to get the money to hit the economy all at once, so the little tick up it causes can be trumpted this fall. If it was spread out over half the year, the economy wouldn't even really notice.

kentuckyliz
kentuckyliz

Re: "Schools are underfunded, we have poverty and hunger here in the wealthiest nation in the world, drug and crime problems, and even disease." That's really ignorant. The IRS would be fiscally irresponsible to spend money on these things that are entirely outside their agency mission. They can't spontaneously reassign their budget to the department of education, the department of health and human services, to drug treatment programs, law enforcement agencies, or the centers for disease control. Duh.

That being said, I don't think they should have sent the mailing. Anyone too ignorant to pay attention to the news and know it's happening and to file taxes if they don't need to otherwise...is too ignorant to merit the check.

Sounds like Democrat handholding...I bet the Dems wrote the reminder mailing into the bill.

Brip Blap
Brip Blap

Oh, yeah, don't get me wrong, the letter is an amazing waste. The rebate itself is a waste, too.

Any time I get ANY paper communication from the government I wish I could "opt out" of paper mail like I can with most of my credit cards, utilities, etc.

Unfortunately I also believe that Benjamin Franklin was right: "People get the government they deserve." Most people will be too excited about their deficit-bloating rebates too complain about government waste - and I seriously doubt any fiscal sanity is going to come to Washington even if we do have a severe recession. Sad.

Jeremy
Jeremy

Oh, without a doubt. There are many greater spending wastes out there. But it is amazing to see that just to mail a simple letter can cost over 40 million dollars when maybe 10% of those letters will actually do any good.

It is just a drop in the bucket of the many things that government wastes money on.

Brip Blap
Brip Blap

Here is the scary stat: $42 million is how much 3 hours of the Iraq war costs our country. Seriously, 3 hours - no joke; we are running at a rate of $14 million dollars PER HOUR. This mailing is waste on a trivial scale compared to that.

Llama Money
Llama Money

100% waste of taxpayer's money. The tax rebate is wasteful enough ( though I sure won't turn mine down ), and this is just icing on the (sour) cake. Again, typical of our government. I'd like to see some businessmen running our country for once, rather than career politicians.

Ron@TheWisdomJournal
Ron@TheWisdomJournal

For a list of some other complete wastes of taxpayer money, read The Government Racket by Martin Gross. It's a few years old, but it will blow your mind how much this government of, by and for the people wastes.

$43 million is a drop in the bucket

WebGuy
WebGuy

While I admit to not being qualified to say where $42M would be best spent, there's no way in hell that this is a good way to spend it.

Jeremy
Jeremy

FM, I'm not sure if they actually pay the post office for postage or not. In an article I read on CNN it said that it would cost 39 cents per mailing to "create and process" the letters. I don't know if that included postage paid to the post office or not.

Heidi
Heidi

I read about this! I would love to know who in Washington thought that this was a good idea.

I agree with you - considering how weak our economy is right now, that $42MM could have done a lot more good somewhere (anywhere?) else.

Shadox
Shadox

I just got my reminder letter the other day. I am not at all clear about why these are necessary. If you file your 2007 returns you don't need to do anything else. If you don't file your returns there are two options: (i) you are a tax evader - so, from my perspective, the hell with you; (ii) you are not required to file, in which case there should be some way for the government to track you down and pay you the rebate. My question is: if you did not file previously, does the government know where to send you a letter to remind you to file?

Fiscal Musings
Fiscal Musings

I agree that this mailing is on most levels wasteful, but it made me think of another question. Does the government have to pay postage... to itself? I'm not exactly sure how it works, but I don't imagine they have to pay for a bunch of 41 cent stamps. Anyone know?

Ray Roman
Ray Roman

It is unfortunate, but oh so typical of our government to spend, spend, spend without looking at the cause and consequences of the spending. If one were to carefully look and the wastefully spending at all levels of government from local to federal I would bet we'd all be absolutely shocked.

Diana
Diana

Agree with Webomatica. This is the first year I actually had to pay IRS instead of getting refund back, and if the rebate could become a deduction, I would be getting money back still which of course is better. I certainly think the "reminder" is a waste of money, whoever thought of this idea to burn money should be fired.

Webomatica
Webomatica

Yeah I think this is wasteful (but typical of the government). Here's what I don't get. Say this year I do my taxes and find I owe $600 in taxes. So I fill out my return and pay the $600. Then later I get a refund of $600. So ultimately it's a wash, and surely money is wasted taking my check and sending me one in return.

What I mean is why not just give those qualified for a rebate a deduction? Maybe someone can fill me in on why this isn't possible.

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