The federal Earned Income Tax Credit (EITC) is America's largest and
most successful anti-poverty program. And it continues to expand its reach.
That's in no small part because of the concerted efforts of mayors across
the country.
Even though a high percentage of eligible taxpayers now claims the EITC,
many don't, either because they don't know about it, or because they're
put off by the complexity and cost of the filing process. To address those
problems, a number of mayors have been conducting public education campaigns.
Some also have been providing free tax preparation assistance so that
paperwork and filing fees aren't prohibitive deterrents.
One of the first mayors to initiate a drive to expand the EITC's reach
was Chicago's Richard Daley. "We're concerned that thousands of eligible
Chicagoans failed to apply for an EITC refund because they weren't aware
of the program or didn't understand it," said Daley.
Daley directed Chicago's Tax Assistance Center to contract with nonprofit
groups to establish 25 sites where residents can receive free assistance
from trained volunteers in preparing their tax returns. That's a particularly
important service, since fees in many cases can amount to more than 10
percent of a taxpayer's refund. Nationwide, preparation fees and charges
for "rapid refunds" cost EITC filers nearly $2 billion per year.
Meanwhile, Daley enlisted the business community in a massive campaign
to saturate the city with EITC publicity, according to Myer Blank, executive
director of the Tax Assistance Center. That is "really the driving
force behind the program's success," Blank said. "We're hoping
to hit everyone at least five or six times with our message."
Working with city agencies, Blank has targeted 1,700 buses and trains,
600 churches and synagogues, 240 parks, 80 libraries, and eight colleges.
The Chamber of Commerce's 2,500 members have joined the effort. Local
businesses display posters in their stores. Utility companies have included
more than 5 million notices in monthly bills. Students have brought information
home with report cards. The city's non-emergency 311 hotline directs callers
to the tax preparation sites closest to their homes and workplaces.
The outreach initiative, now in its fourth year, is paying dividends.
Last year, 13,000 Chicago households filed EITC applications worth $17.7
million, a 25 percent improvement over the previous year. Similar growth
is expected this year. Blank says those numbers don't even account for
people who filed on their own but were made aware of their eligibility
by the city's efforts.
The EITC is designed to provide a powerful work incentive for low-wage
earners by supplementing their income through a refundable tax credit.
It lifts nearly 5 million people per year above the poverty line. For
mayors, it is good social policy with an added benefit: It's also good
economic policy. Last year, it provided 19 million Americans with $32
billion in refunds. That amounts to a substantial economic stimulus. The
Brookings Institution found that the EITC provided $17 billion to the
economies of the 100 largest U.S. metropolitan areas in 1998, but a large
portion was flowing out to the suburbs. It's no wonder that around that
time, Daley and other mayors initiated outreach efforts, so their cities'
residents would share the benefits and help stimulate their local economies.
Chicago may have made one of the earliest and most comprehensive pushes
to broaden the EITC's benefits, but other cities are following suit. Mayor
Graham Richard of Fort Wayne, Ind., a city with a stunningly low 22 percent
participation rate in the program, has studied Chicago's success. Richard's
staff members met with Blank, and they have since modeled their own program
after the Windy City's initiative. They now have multilingual volunteers
and financial literacy information provided by coalition partners such
as Fort Wayne's National City Bank. Many of those who don't participate
in the EITC don't have bank accounts or have trouble getting loans when
they need them. Now, when taxpayers go in for preparation assistance,
they also find advice about developing assets, repairing personal credit,
and establishing Individual Development Accounts.
Meanwhile, national nonprofit organizations have picked up on the trend,
developing best practices for cities with fledgling EITC outreach campaigns.
The Annie E. Casey Foundation created a toolkit for the 22 cities participating
in Making Connections, its neighborhood transformation initiative, and
has since made the toolkit available to anyone interested in promoting
the EITC.
The National League of Cities (NLC) stresses that local officials can't
afford not to have an outreach program. Julie Bosland of the NLC's
Institute for Youth, Education, and Families says: "Take how much
[money has been] left on the table. With that coming into the economy,
then circulating through it, you get a significant economic boost."
