The Earned Income Tax Credit (EITC), also known as the Earned Income Credit (EIC), and DC Earned Income Tax Credit (DC EITC) are tax benefits for working people who earn low to moderate incomes. Those who qualify and file a claim may get a reduction in taxes owed or a refund. This is great news.
The not-so-great news is that thousands—perhaps up to 20,000 DC families and households—are not taking advantage of tax credits. Non-participation keeps money out of the hands of people and DC government in terms of sales taxes that come with local spending (see below). And we’re not talking about a little bit of money; we’re talking about a lot of money. For example, an eligible family with two children could receive about $5,700 in 2018 with the federal credit and approximately $2,300 with the DC credit (40% of the federal credit).
Tax Year 2013 DC EITC Claims, by Ward
Here’s where organizations of all kinds come in
#DCEITC Forum: The Role of the EITC in Providing a Pathway to the Middle Class in Washington, DC, Wednesday, December 12 from 10:00 am to 2:00 pm is an opportunity for organizations large and small, formal and informal, to gather in one room to discuss ways to increase the number of individuals and families taking advantage of the DC EITC next year and in years to come.
As the Congressional Research Service points out in The Earned Income Tax Credit (EITC): An Economic Analysis (PDF), “Since the credit is refundable, an EITC recipient need not owe taxes to receive the benefit.” The part about people not owing taxes is a particular challenge: while the lowest income EITC claimants may be used to processes to receive benefits, moderate-income earners may not. And filing taxes is not a natural process when individuals and households have never, or rarely, owed income taxes.
This tough nut to crack requires a broad and more diverse approach than has been in place in the past. The broad and more diverse approach might, for example, require the involvement of BIDs, schools, doctors and other health professionals and facilities, and older resident-serving organizations, and utilities. As well as early care and education facilities, mom and pops/corner stores, the media, and community-based and service organizations.
The active participation of community institutions across the board, an increased number and kinds of organizations participating in outreach and particularly education efforts, would help individuals, families, and the city as a whole.
The community benefits of resident participation in the EITC
Did you know:
“the EITC was originally designed to be a temporary economic stimulus measure, in the Tax Reduction Act of 1975”? (The Earned Income Tax Credit and Community Economic Stability)
The obvious is worth stating: “The local impact of the EITC depends on how, and how many, eligible filers claim the credit.” (The Earned Income Tax Credit and Community Economic Stability)
Former Brookings staffer Natalie Holmes and current staffer Alan Berube—known as an EIC/EITC expert—describe the local economic benefits of the federal and, by extension local credits, in The Earned Income Tax Credit and Community Economic Stability. For example,
Direct economic effects result from EITC recipients spending a portion of their refund locally, supporting local businesses and jobs. Consumer surveys show that low-income families spend a relatively large share of their income on groceries and other necessities, which tend to be purchased locally. Analysis of those surveys links tax refund season to increased likelihood of consumer activity as well as larger purchases (Adams, Einav, and Levin, 2009). People spend more, and more frequently, during tax refund season.
And as The Economic Impact of the Earned Income Tax Credit (EITC) in the City of Fresno by Fresno Works for Better Health Advocacy Center wrote in 2007,
EITC payments to Fresno City residents are injected into the city’s economy when the refund is spent. As interactions among firms, industries and social institutions naturally occur within the local economy, EITC expenditures circulating within the income stream initiate a series of repetitive rounds of income creation, consisting of spending and re-spending, resulting in multiple effects. EITC payments spent in the economy of the city become income for residents, business and local government.
The multiplier effect is real and takes place in DC, as well.
Why APACC cares
One of APACC's goals is to "Enhance the quality of life of residents and other stakeholder in communities near the river by improving access to economic opportunities, affordable housing, wellness and healthcare, and parkland and other outdoor recreation opportunities." Economic stability of individuals and communities is one way to think about economic opportunity.
In many ways, #DCEITC can be considered low-hanging fruit. The law has been on the books for years, an established and qualified organization manages the campaign, and DC government has systems set up to help people participate. And as shown in the bar graph above, thousands of DC residents already participate. The challenge now is to encourage the non-participants to take advantage of what is rightfully theirs. As a network, APACC is doing what networks do: sharing information.