Aaaaah. That sigh of relief you heard Feb. 10 came from hundreds of thousands of Maine taxpayers, just told the IRS won’t be going after the $850 pandemic relief checks they received in 2022.
Will Hall
After days of pins-and-needles uncertainty, we learned the payments will be tax-free, as the state of Maine had always intended. But the relief over the relief should never have been necessary.
Twenty-two states, including Maine, last year sent residents payments to counter the impact of inflation and the economic damage of the pandemic. An estimated 858,000 Mainers began receiving their checks last summer – leaving plenty of time, you would think, for someone to figure out whether the money had to be included in federal income tax returns.
Then, this month, the IRS advised Americans to hold off on filing their returns until the feds could say for sure.
That warning threw the tax season, just getting underway, into chaos. People who had already submitted their returns, people who use tax software, people who use accountants, the accountants themselves – everyone had questions and concerns.
Maine officials couldn’t offer much help. Lawmakers said they’d been assured the IRS would consider the payments tax-free. But Michael Allen, associate tax commissioner for Maine Revenue Services, said his office made no such assurances and in fact never even consults the IRS when setting policy.
Why did the IRS wait so long to decide? Why didn’t the state know for sure? The disconnect seemed entirely preventable. Although resolved in favor of taxpayers, the incident should call attention to the need for more scrutiny about how we’re responding economically to the pandemic.
Don’t get me wrong. I’m not dissing the relief payment program. Those checks have helped many Mainers get by at a critical time and represents a big step toward recovery. But we’ve also misstepped along the way.
ACCOUNTABILITY NEEDED
In a crisis, it’s easy to make mistakes. Still, there needs to be accountability, if only to help prevent such errors from occurring in the next crisis.
During the first year of the pandemic, the federal government’s Paycheck Protection Program provided $800 billion in privately financed, forgivable loans to help keep businesses afloat. More than $340 billion went out the door in the first two weeks. Ultimately, the PPP did much good, allowing millions of Americans to hold onto their jobs as companies were closing and unemployment was skyrocketing.
But in the rush to get loans into the hands of employers, the Small Business Administration and other government agencies sometimes cut corners. Urgency was everything. The result, in Maine and nationwide, has often been abuses that are now being revealed.
We’ve read about some. On Tuesday, Merton Weed Jr. of Norway became the fourth Mainer charged with fraud related to pandemic relief funds. Two weeks earlier, Mark X. Haley II of Rockport pleaded guilty to bilking lenders out of more than $1 million, and now faces up to 30 years in prison.
At the federal level, an independent, nonpartisan oversight committee created by Congress has been uncovering cases like these as well as much greater problems. So far, the Pandemic Response Accountability Committee has issued more than 400 oversight reports, identifying hundreds of billions of dollars that may have gone where it wasn’t supposed to.
Just this month, the committee announced it had found nearly 70,000 cases where applicants for PPP and another relief loan program used incorrect or fictitious Social Security numbers to obtain a total of $5.4 billion. Some of those cases date to April 2020.
LESSONS LEARNED
Is uncovering cases like these just 20/20 hindsight? Or will some good come from all the scrutiny? The committee seems to hope so.
In June 2022, the PRAC issued a report with 10 “lessons learned” about the relief oversight process, including steps such as validating more self-reported information from loan applicants to making better use of death records. (In the first four months of the pandemic, $3.5 billion in federal stimulus checks went out to deceased Americans, the committee found.)
The committee, made up of inspectors general from throughout the federal government, wrote: “Congress and leaders across federal agencies need to know what programs are highly susceptible to fraud during a crisis like the pandemic. In some cases, agencies implemented corrective actions when shortcomings were identified. But in other cases, Congress and agency leaders still need to take action to reduce the possibility of fraud.”
Allowing large-scale fraud is a very different thing from bungling over the tax status of Maine’s relief checks. But the takeaway is the same: In the current crisis, we need to ask questions about even the most well-intentioned efforts to help individuals and businesses in financial need. Yes, there are bound to be missteps. But we have the ability to do better. The economic assistance is of our own making; so too is our oversight of it.
Three years in, there is still so much about the pandemic that exceeds our capabilities. The novel coronavirus stubbornly insists on mutating, and the current subvariant may be the most infectious yet. Hundreds of Americans are still dying from COVID each day, adding to the U.S. death total of 1.1 million. And there remains little understanding of what the long-term health consequences of the disease will be, or what to do about them.
There is a lot about the pandemic we cannot control. We should at least do a better job of controlling what we can.
Will Hall is the business editor of the Portland Press Herald. You can reach the Business Desk at business@pressherald.com.
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