Governments at every level are looking for ways to perform their functions effectively while reducing their costs. In that regard, state Sen. Eric Kearney’s proposal to offer Ohioans the option of receiving their state income tax refunds on prepaid debit cards is promising and deserves careful consideration.
Senate Bill 365, which the Cincinnati Democrat introduced earlier this year, aims to eliminate the expense to the state of printing and mailing checks. Debit cards rapidly have become a popular feature of financial services, the technology ensuring quick, convenient and relatively safe transactions. Several states, including New York and Georgia, this year paid tax refunds by debit card. Ohio already distributes food stamp and unemployment benefits electronically by debit cards. As an alternative to direct deposit, the option would benefit the estimated 414,000 Ohioans who do not have a savings or checking account.
The wariness of state tax officials about the proposal is understandable, especially as the U.S. Treasury suspended a $1.4 million federal pilot program because of low participation. Another major concern is that consumers may find they have only traded check-cashing fees for a variety of bank fees for using the cards. Still, as Policy Matters Ohio has pointed out, the state can structure a program that enables card users to avoid unnecessary fees to access funds the state owes them. Ohio can and should build on its own and other states’ experience to craft a smart program.