The Need to Know
April 24, 2007
A lot of low wealth people would be better off each day if they had just a little knowledge, the knowledge of available resources.
A while back I wrote about the Benefit Bank, a computer program that helps people determine what government programs they qualify for and how to get those benefits.
Yesterday’s Birmingham News had an above-the-fold story about food stamps and how so many who qualify do not receive them, especially the elderly. Part of the reason that some do not receive food stamps is that the application process is so foreboding.
No kidding. The article reports that with the current application you’ll need all the following: proof of income, bank statements, proof of mortgage expenses, child-care expenses, Social Security numbers for all members of the household, and any child support payment information. The Department of Human Resources wants to simplify the process so that more than the 57% who now receive the stamps will begin to benefit.
That’s a good thing.
EITC too
I recently ran across an article from a Hawaiian newspaper that describes the need for a state Earned Income Tax Credit in that state, which has the highest income tax burden, nationally, on the poor. Interesting for Alabama, which has raised the threshold this year on income tax payment, only to see ourselves staying at the top of the list of states that tax the poor, because other states are addressing the need for reform as well.
So what is the EITC? From the IRS’s own website: “The earned income credit (EITC) is a tax credit for certain people who work and have earned income in tax year 2006 under $38,348. A tax credit usually means more money in your pocket. It reduces the amount of tax you owe. The EITC may also give you a refund.”
In other words, the EITC is intended to give a break to the working poor, encouraging them to remain employed. Ronald Reagan called EITC "the best antipoverty, the best pro-family, the best job creation measure to come out of Congress."
The problem is that many who qualify don’t realize that they do. Additionally, according to the Center on Budget and Policy Priorities, “the EITC remains much too complex for low-income working families. Due in significant part to its complexity, the EITC can lead to tax-filing errors, and about 70 percent of filers claiming the EITC resort to paying commercial tax preparers to file their return, a larger percentage than for tax filers generally.” They support simplification of the process.
(By the way, many states with income taxes have a state version of the EITC. Alabama does not. For more information you can check out the State EITC Online Resource Center. They have state-specific data and information.)
So what to do?
One approach in Alabama – SaveFirst
Some college students in our state are getting the opportunity to address this need directly. SaveFirst, a program offered by IMPACT, a nonprofit headed by APP board member Stephen Black. Here’s what their website says about SaveFirst: “The goal of the SaveFirst Initiative is to train college and graduate students to (a) offer free tax preparation services and access to checking and savings accounts and Individual Development Accounts (IDAs) to low-income individuals who are eligible for an Earned Income Tax Credit refund and (b) plan, organize, and administer a series of educational seminars for low-income individuals on savings and investments.”
Often these students are able to introduce low-income families to the EITC and save them significant money. How cool is that?
Where there’s a problem, there’s a solution. We just have to be aware – and creative.
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