There aren’t too many tax fans around these days. Times are hard, people are working harder, and government programs designed to be solutions are often seen as part of the problem. More than ever, tax season is a dreaded time.
If only there was a simple, efficient tax program that rewarded those who work hard but struggle to get ahead. If only someone would create a tax program that benefits businesses.
And while we’re dreaming, let’s make one that creates jobs in San Diego County too.
Well, wake up, because it’s real. Not only is there indeed a tax credit that helps families, stimulates the economy and creates jobs, but the San Diego region in particular stands to benefit from it.
It’s called the Earned Income Tax Credit, or EITC, and here’s the stunner: it was created back during the Nixon administration. While it has long been called the federal government’s most effective antipoverty program, research released recently by the New America Foundation is calling attention to the incredible boost the EITC gives to San Diego’s economy.
Programs like this one have been proven to stimulate the economy because they place money into the hands of those who are likely to spend it immediately. The report shows these federal refundable tax credits have a ripple effect – when families claim this credit, they generally spend most of it within their communities.
The grocery store, the auto repair shop, the cleaners – businesses like these see increased sales, and can then hire and pay more employees.
The report, authored by economists at California State University Fresno, estimates that families spending their refunds in San Diego County generated $350 million dollars in sales at local businesses, which then created 2,000 jobs that paid $87 million in wages.
Here and now, the credit matters. More people are likely eligible this year, since incomes are lower due to the tanking economy and high unemployment rates. The program has bang for the buck during tough times. And there’s another reason the EITC is important this year, in the San Diego area and California overall.
As a part of the American Recovery and Reinvestment Act, the EITC has been temporarily expanded, so more people qualify and receive larger credits. The income limit is $48,279 for married couples filing jointly, and the maximum credit has been increased to $5,657 for families with three or more children.
So what’s the problem? Many stimulus dollars that should go to families’ pockets and to our communities are instead going unclaimed.
The Internal Revenue Service has estimated that California’s qualified non-filer rate – the percentage of those qualified who don’t apply – is 24.9 percent, the highest in the nation.
Whether because people are confused about the credit or simply don’t know it exists, tens of thousands of people in San Diego don’t claim the EITC. That hurts businesses too.
The report by the Fresno State authors forecasts San Diego County’s economy will to lose more than $96 million in sales and 570 jobs because of unclaimed credits this tax season. That’s more than will be foregone in all but two other counties – Los Angeles and San Bernardino – in the state.
Ask any family trying to make ends meet if they could use a refund that averages $1,900. And ask any business owner if he or she thinks the regional economy would benefit from that $96 million that would be spent within the county.
The bottom line is that the EITC is a tax program that benefits the bottom line of businesses as well as families.
We know that many workers who would be qualified are not claiming their refund.
This year, many would prefer that this money be used by families and businesses, instead of sitting unclaimed in Washington, D.C.
Learn more about the report by visiting www.newamerica.net. To find free local tax-preparation services, call 211.