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House Ways and Means Subcommittee Focuses on Earned Income Tax Credit

On February 13, the House Ways and Means Subcommittee on Oversight held a hearing on efforts to reach low-income communities with information on the Earned Income Tax Credit (EITC). During the hearing, the subcommittee heard testimony from Internal Revenue Service (IRS) officials, policy experts and community leaders.

In his opening remarks, Chair John Lewis (D-GA) indicated that “seven million working-poor individuals and families with children are not claiming this important tax credit and not benefiting from about $12 billion in federal assistance.” Rep. Lewis added that “[t]he EITC lifts nearly five million people above the poverty line each year. Last year, about 22 million working-poor families claimed the EITC on their tax returns, receiving an average tax refund of $2,000. Today, the Subcommittee will explore why EITC benefits are not being received and what can be done to improve the situation.”

Ranking Member Jim Ramstad (R-MN) agreed, indicating that the subcommittee wants to ensure that everyone who is entitled to receive the credit does. Rep. Ramstad further applauded the fact that the EITC has grown beyond its original purpose when first enacted in 1975 to “rebate payroll taxes” taken from low-wage workers. However, he added that millions more are eligible to receive the credit, but are not claiming it.

Richard Morgante, commissioner of the Wage and Investment Division of the Internal Revenue Service, informed the subcommittee that “75 to 80 percent of all eligible tax payers receive the EITC meaning 20-25 percent do not get the credit they deserve.” He testified that “anecdotal evidence suggests people fail to claim the credit for a variety of reasons. First, is a lack of knowledge. They may not know about the credit in some cases because they may be in underserved (e.g., rural) areas. Second they may not make enough money to file a tax return. Currently, individuals with incomes below $8,450 and couples with incomes below $16,900 do not have a filing requirement. However, taxpayers with earned incomes at, or well below these limits, are potentially eligible for the EITC.” Mr. Morgante added that “[c]ultural or language barriers may also prevent EITC claims” and that there is a “misperception that the credit is only for people with children [or that] the value of the credit is much lower for those without children.”

To overcome these barriers, Mr. Morgante stressed that the IRS has partnered with 300 community-based organizations nationwide and congressional offices, and has improved its direct mail efforts to potentially eligible taxpayers, website access, and volunteer income tax assistance programs to reach low-income individuals. He also suggested that Congress make legislative changes such as: “allowing separated spouses to claim the EITC; simplifying the rules regarding the presence of a qualifying child; making taxpayers eligible to receive the EITC for workers without qualifying children if their child does not have a valid social security number; and clarifying when a social security number is valid for EITC purposes.”

Deborah Lum, executive director of the Atlanta Workforce Development Agency, and Karen Rogers, director of the City of Atlanta Mayor’s Office of Weed and Seed, testified about the city’s efforts to educate low-income residents about the EITC program. Ms. Lum and Ms. Rogers explained that the Atlanta EarnBenefits program has enabled low-income residents to access the EITC, along with Medicaid, PeachCare for Kids, WIC, food stamps, the Low-Income Home Energy Assistance Program, and other federal tax credits, along with free tax preparation services. Ms. Lum and Ms. Rogers stated: “Local governments are an important partner in expanding the reach of EITC. The millions of dollars in disposable income that eligible families receive from the EITC have a direct impact on the economic well-being of families and local communities.”

Bonnie Esposito, executive director of AccountAbility Minnesota (AAM), testified that targeted outreach to specific communities also is required to ensure maximum participation in the EITC program. “Latino families claim the credit at a lower rate than other taxpayers. AccountAbility Minnesota serves many Latino families and our experience is they decide to seek tax assistance based on a recommendation from a trusted family member or friend. [We have] had success reaching Latino families by hiring outreach staff from the Latino community and ensuring bilingual volunteers are available at the tax sites. This targeted outreach takes additional resources but has been successful for AAM.”

John Wancheck, EITC campaign coordinator for the Center on Budget and Policy Priorities, indicated during his testimony that the “EITC has become one of the most important income supports for the working poor.” As a result, Mr. Wancheck testified that the Center has conducted a national outreach campaign for nearly twenty years that trains volunteers about ways to reach individuals who may be eligible for the tax credit, such as part-time, self-employed, or homeless workers; grandparents who work and are raising grandchildren; foster parents; and workers raising older children who are full-time students or who are permanently disabled. “Each year, we have distributed an updated community outreach kit to 15,000 to 20,000 social service organizations, faith-based groups, small businesses, large corporations, unions, community-based organizations, and state and local government agencies,” he said, adding, “The kit also provides links to EITC materials and information produced by other agencies, including the IRS, Corporate Voices for Working Families, the National League of Cities and others.”

Donna Klein, president and CEO of Corporate Voice for Working Families stated, “We estimate that through our business members and strategic partners’ distribution channels alone, [our] Employer Guide potentially touches ten million low-wage workers.” Ms. Klein discussed how the business community plays a critical role in spreading the word about the EITC: “Each year we revise the Employer Guide and release it at the beginning of the year to coincide with employers’ distribution of W-2s. We use this window of opportunity to educate employers not only on the EITC, but also on the full array of benefits for which their employees may be eligible.”

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