ONE OF the most powerful government programs to help fight poverty among low-wage worker is the earned income tax credit. Those who claim the credit stand to keep thousands more of the dollars they earn. That's a tremendous boon, especially now when the economy is weak. But this underused tax policy needs more publicity - which the City of Boston is trying to provide.
Last year, one Roxbury mother of three received $8,000 by applying retroactively for several years of the tax credit, according to officials at ABCD, the local antipoverty agency. Altogether, Boston's tax filers claimed $73 million through the EITC in 2006, getting an average of $1,700 each, according to the Internal Revenue Service.
The beauty of EITC is that it's a tax credit - not a rebate - so it can even put money in the pockets of people too poor to owe any income taxes. It's a policy that rewards work, helps families, and stimulates the economy.
The number of claims in Massachusetts is increasing. Still, many who could benefit don't know about the EITC.
"When working families do not claim the EITC, which they have worked hard for and are entitled to, money is lost to the entire community that could go toward job creation and boosting the economic activity of the whole city," Mayor Menino said in a statement.
Nationally, some 20 to 25 percent of eligible taxpayers fail to claim the credit, according to IRS estimates.
Even many who do file for the credit end up losing money because they pay to have their taxes prepared, according to the nonprofit Brookings Institution, a think tank in Washington.
Brookings says that of the 70 percent who paid tax preparers in 2004, a third got dicey "refund loans" from companies that advance filers the amount of their refunds but charge high fees.
Mayor Menino, the IRS, and local organizations have set up 25 tax preparation sites for people who are eligible for the EITC. It's free help filling out tax forms and filing electronically.
A list of the locations is available at cityofboston.gov/bra/eitc. Financial counseling is also available at all the sites.
The challenge is to reach the millions who are missing out on the EITC. The IRS doesn't have an advertising budget, spokeswoman Peggy Riley says, so it relies on cities and local partners to spread the word.
That creates work for several players. Federal and state governments could fund efforts to find and inform the missing 20-plus percent, setting up outreach pilot programs across the country. Foundations could help fund this effort. And advertising agencies could run pro bono EITC campaigns.
To do the most good, this wage-friendly tax policy should become common knowledge.
