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HomeMy WebLinkAboutR-02-0933J-02-808 8/22/02 RESOLUTION NO. 02- 933 A RESOLUTION OF THE MIAMI CITY COMMISSION AUTHORIZING A GRANT, IN THE AMOUNT OF $25,000, IN SUPPORT OF AN EARNED INCOME TAX CREDIT ("EITC") OUTREACH CAMPAIGN TO BE COORDINATED BY THE HUMAN SERVICES COALITION OF DADE COUNTY, INC., IN CONJUNCTION WITH THE OFFICE OF MAYOR, TO PROVIDE SEED MONEY TO: (1) FUND INITIAL STAFFING COSTS; (2) CONDUCT AN OPINION POLL TO GAUGE THE EFFECTIVENESS OF OUTREACH EFFORTS WITHIN TARGET MARKETS; (3) CONDUCT CONSUMER SURVEYS TO DOCUMENT EXPERIENCES OF EITC RECIPIENTS RELATED TO UTILIZATION OF COMMERCIAL TAX PREPARERS VERSUS FREE TAX ASSISTANCE SITES; AND (4) AUGMENT THE MARKETING BUDGET FOR OUTREACH SERVICES IN THE CITY OF MIAMI; AUTHORIZING THE CITY MANAGER TO EXECUTE ALL DOCUMENTS) NECESSARY, IN A FORM ACCEPTABLE TO THE CITY ATTORNEY, FOR SAID PURPOSE; AND ALLOCATING FUNDS FOR THE GRANT FROM THE NON - DEPARTMENTAL ACCOUNT, ACCOUNT CODE NO. 001000.921002.6.930. BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA: Section 1. A grant, in the amount of $25,000, is authorized in support of an Earned Income Tax Credit ("EITC") Outreach Campaign to be coordinated by the Human Services CITY COMOSSION MEETINtG OF } G 7 2 2002 r �s�; Mian No. Coalition of Dade County, Inc., in conjunction with the Office of Mayor, to provide seed money to: (1) fund initial staffing costs; (2) fund costs to conduct an opinion poll to gauge the effectiveness of outreach efforts within target markets; (3) conduct consumer surveys to document experiences of EITC recipients related to utilization of commercial tax preparers versus free tax assistance sites; and (4) augment the marketing budget for outreach services in the City of Miami. Section 2. The City Manager is authorizedl�to execute all document(s) necessary, in a form acceptable to the City Attorney, for said purpose, with funds for the grant allocated from the Non -Departmental Account, Account Code No. 001000.921002.6.930. Section 3. This Resolution shall become effective immediately upon its adoption and signature of the Mayor .2/ 1/ The herein authorization is further subject to compliance with all requirements that may be imposed by the City Attorney, including but not limited to those prescribed by applicable City Charter and Code provisions. 2/ If the Mayor does not sign this Resolution, it shall become effective at the end of ten calendar days from the date it was passed and adopted. If the Mayor vetoes this Resolution, it shall become effective immediately upon override of the veto by the City Commission. Page 2 of 3 021w 933 PASSED AND ADOPTED this 22nd day of August 2002. JAUEL A. DIAZ, MAYOR ATTEST: ADS�%- $PISC4ILLA OMPSON CITY CLERK APPROVED AS TO FORM AND CORRECTNESS (7. < L+ A EJANDRO VILAR LO TY ATTORNEY W6554:BSS Page 3 of 3 02- 93 CITY OF MIAMI, FLORIDA INTER -OFFICE MEMORANDUM TO : Honorable Members, City of DATE : August 22, 2002 FILE Miami Commission SUBJECT Earned Income Tax Credit (EITC) Outreach Campaign FROM REFERENCES: Manuel A. Diaz ��ir / Mayor ENCLOSURES: RECOMMENDATION: I respectfully request the adoption of a resolution authorizing the City Manager to execute a grant contract in the amount of $25,000 for the purpose of supporting an Earned Income Tax Credit (EITC) Outreach Campaign to be coordinated by the Human Services Coalition of Dade County, Inc. in conjunction with the Office of Mayor. Funding for said grant is available from Non -Departmental Account 001000.921002.6.930. BACKGROUND: The Earned Income Tax Credit The Earned Income Tax Credit (EITC) is federal tax benefit to help low-income workers increase their financial stability. Enacted in 1975, this federally funded credit has grown to become the largest anti -poverty program in the country helping reduce taxes for workers, supplement wages, and make work more attractive than welfare. In 2000, over $31 billion in federal EITC funds flowed into local communities helping 4.7 million people above the poverty line.' Today, the credit is widely regarded as the most successful federal program in aimed at helping the working poor move out of poverty. Eligibility Requirements To claim the EITC, an individual must: ■ File a tax return with the Internal Revenue Service (IRS) and complete a Schedule EIC ■ Have earned income ■ Be a citizen of the United States or resident alien ■ Have a valid social security number ■ Have investment income that does not exceed $2,450 ' "Community Based Partnerships Building Assets: A Roadmap to Self -Sufficiency." Prepared by the United States Internal Revenue Service (IRS). 1 02- 933 Earn less than $10,710 if they have no qualifying child, earn less than $28,281 if they have only one qualifying child, or earn less than $32,131 if they have more than one qualifying child. Importance of the EITC to Families and Communities The EITC provides the greatest benefits to working families and local communities. The largest EITC benefit is provided to working families with two or more children. A working family with two or more children earning less than $32,121 in income can qualify for a refundable federal tax credit of up to $4,008.2 Children are more likely to be impacted than any other age group. Of the 4.7 million people raised above the poverty line as a result of accessing the c redit, 2.6 in illion w ere c hildren. A dditionally, the E ITC c an a Iso b e c laimed b y e ligible recipients retroactively for up to three years by submitting an amended return. This feature potentially could result in a sizeable cash windfall for a working poor family. Local communities also benefit greatly from increased access to the EITC. In 1997, 250,000 residents of Miami -Dade County received over $393 million in federal EITC. Residents of the City of Miami alone received over a $61.5 million, a share of the region's EITC dollars roughly equal to the city's share of the region's population. The average family in City of Miami claiming the EITC earned an average credit of $1,532. Families in certain neighborhoods throughout the city received particularly large refunds, specifically those living in Allapattah ($10.2 million) and Little Haiti/Wynwood ($9.4 million).' As one can see, this benefit is of particular importance to communities because the resources are spent locally and because it helps reduce the demand for other public service and benefit programs. Recipients who have participated in surveys about the credit indicate that the money they receive from the EITC is used for investments in education and savings, as well as to help them pay bills and daily living expenses.4 Surveys have also indicated that the refund proceeds were also spent to help increase their access to employment and to improving their existing housing situations With nearly one-third of all tax filers claiming the EITC, the City of Miami had a higher percentage of families claiming the credit than all but three of 27 cities surveyed in a Brookings Institution study. Miami's rate of receipt was the same as that of Detroit (32.3%) and comparable to cities such as Hartford and St. Louis. Our local rate easily outstripped that of all other Florida cities. 6 2 Ibid. 3 "Rewarding Work: The Impact of the Earned Income Tax Credit in Greater Miami." Center on Urban & Metropolitan Policy, The Brookings Institution. 4 Ross Phillips, Katherin. "Who Knows About the Earned Income Tax Credit?" The Urban Institute, Series B, No. B-27. January 2001. 5 Smeeding, Timothy M. , Katherin Ross Phillips, and Michael O'Connor. "The EITC: Expectation, Knowledge, Use, and Economic and Social Mobility." Center for Policy Research, Working Paper Series No. 13. 2000. 6 Ibid. 02- 931 Y Obstacles and Opportunities While EITC has a higher participation rate than many traditional support programs for low-income workers, studies have shown that many eligible households forgo claiming the credit. This failure to claim the credit can be attributed to three main factors: ■ Lack of awareness or knowledge about eligibility guidelines; ■ Limited literacy proficiency in the English language; and ■ Limited access to affordable, competent tax preparation assistance. Of particular note, both studies that have examined participation rates for the EITC generally indicate that immigrants and citizens for whom English is a second language are more likely t o f orgo c laiming t he c redit. S ome 2 6 million f oreign-born p ersons are r esiding i n t he United States. Census figures indicate that the City of Miami has one of the highest, if not the highest, percentage of foreign -born residents of any city in the U.S. 35% of these foreign -born residents are naturalized, with the balance made up of either resident aliens or undocumented immigrants.' In addition to facing real language barriers that limit access, recent changes to many federal entitlement programs for resident aliens have created the false impression that non- citizens cannot qualify for the EITC.' Knowledge differences between immigrant and native low-income wage earners are stark. Among immigrant populations, naturalized citizens are also significantly more likely to know about the EITC than non -citizens (37.9% versus 21.6%). Both groups, however, are much less likely to know about the credit than low-income individuals born in the U.S. (73.2%). This difference in knowledge translates into differences in participations rates. More than 50% of native low-income workers have received the credit as compared to 22.9% of naturalized citizens and 9.1% of non -citizens. This problem is particularly acute among low-income Hispanic parents who are significantly less likely to know about or receive the EITC than low-income non - Hispanic parents of any race. 9 While not documented in any study to date, one can likely hypothesize that participation rates among Haitian -American immigrants mirror that of their Hispanic counterparts. The above listed facts illustrate the potential for dramatic gains in EITC participation by Hispanic and Haitian immigrant residents of the City of Miami. IRS data for the year 2000 illustrating claims by zip code provides an estimate of potential additional EITC claims totaling approximately $26 million.'o History of the Local Outreach Campaign Local efforts to provide greater EITC access have existed locally for a number of years. The AARP, the IRS, and Miami -Dade Community Action Agency (CAA) have provided free tax preparation assistance to low-income earners for a number of years through sites across the Miami -Dade County. Efforts to date, however, have been uncoordinated and have not attempted ' O'Connor, Michael. "The Earned Income Tax Credit: Eligible Families at Risk of Losing Benefits." Journal of Poverty Law and Policy. November — December 1999. ' Ibid. 9 Ross Phillips, Katherin. "Who Knows About the Earned Income Tax Credit?" The Urban Institute, Series B, No. B-27. January 2001. 'o Tax Year 2000 EITC Claim by Zip Code, Miami -Dade County. Prepared by the Internal Revenue Service (IRS). 02- 931 a sustained public awareness campaign about the EITC throughout the tax season as a complement to the provision of free tax assistance. In January of this year, representatives from my office and the Human Services Coalition of Dade County, Inc. (HSC) met to discuss the possibility of launching a coordinated EITC campaign. HSC has been active in local efforts to enroll working families in state's KidCare program (a state and federally subsidized children's health insurance plan), as well as in organizing and policy -advocacy efforts focused on a number of welfare -to -work related issues. After reaching general agreement on the importance of this campaign, my office set about the task of working with HSC to research successful efforts elsewhere and solicit philanthropic funding support for this effort. Each of you will recall that EITC outreach was also included among the many initiatives prioritized in my State of the City Address in April. Joint efforts by HSC and my office also resulted in the adoption of EITC outreach as a one of the principal goals for the Greater Miami Chamber of Commerce for 2002-2003. Research focused on identifying successful campaigns in other jurisdictions led us quickly to Chicago and upon a successful model for local replication. Chicago's EITC campaign is largely championed by the city's mayor and coordinated by a local non-profit, which receives financial support from the city and local foundations to support the campaign. Based on this research, representatives from my office and HSC decided to approach the John S. and James L. Knight Foundation in March of this year to solicit funding support for this effort. In late July, the Knight Foundation committed to providing $250,000 in funding for an 18 - month outreach campaign. Funding will be used for costs associated with additional staff support for the Human Services Coalition, local mass media and grassroots marketing efforts, and the operation of free tax preparation assistance sites throughout the city. Given the Knight Foundation's many investments within the City of Miami and the expressed commitment of my office, the thrust of the campaign will be focused on neighborhoods throughout the City. In June of this year, Mayor Penelas' Office and Miami -Dade County signed—up to support this effort. The campaign will now benefit from the support of the social services infrastructure and resources of Miami -Dade County. Goals of the Local Campaign The primary focus of the campaign will be increase the general awareness among low- income wage earners about the EITC and increase the overall number of recipients within Miami - Dade County and specifically the City of Miami. Communities within the city with low participation rates and a high number of potential claimants will be priority targets of the campaign. Other goals include: ■ Increasing the flow of federal tax dollars into low-income communities throughout the City of Miami and Miami -Dade County ■ Increasing access to financial services and savings rates among low-income wage earner, specifically by increasing access to bank savings accounts ■ Increasing the financial literacy, credit worthiness, and asset -base of low-income families through referrals to financial literacy seminars, credit counseling agencies, and structured savings programs ■ Increasing participation of low-income families in other income support programs such as Kidcare, Medicaid, and Food Stamps. 4 02- 933 Use of City Funding Our small financial commitment to this outreach campaign will be utilized in the following manner: ■ Serve as seed money that will fund the initial staffing for this effort; ■ Augment the marketing budget for outreach in the City of Miami; ■ Fund polling to gauge the effectiveness of outreach efforts within target markets; and ■ Conduct consumer surveys to document experiences of EITC recipients utilizing commercial tax preparers versus free tax assistance sites. Additional Reference Materials Reference materials included with this cover memo about the EITC in general and our local campaign specifically are included under this cover for your reference. Enclosed reference materials include: ■ Brookings Institution report on the impact of the EITC in Greater Miami ■ An article from the Urban Institute about EITC awareness ■ An article from the Journal of Poverty Law and Policy about eligible families at risk of losing EITC; and ■ A copy of the proposal submitted by the Human Services Coalition to the Knight Foundation. Questions regarding this issue can be directed to Javier Fernandez, Policy Coordinator, in my office. Mr. Ferndndez can be reached by phone at (305) 250.5313 or via e-mail at j fernandez(u)ci.miami. fl. us. 5 02- 933 CENTER ON URB N & NIETROPOLITAN POLICY RewardingWorks. The Impact of the Earned Income Tax Credit in Greater Miami Findings This war the federal Earned Income Ca.x Credit ( EflC) NNill pro%ide o%er S30 billion to 15.4 million lo%% -income taspavers across the U.S., making it the lamest federal aid pro- gram for «orking poor families. This study is the first to describe the spatial distribution of the EITC in 27 metropolitan areas across the countr�. An anal�sis of the Miami region sho%\s that: - 0 In 1997, 250,000 residents of the Miami region earned o\er S393 million in federal EITC refunds. Residents of the citN of Miami alone received oyer S61 million it share of the region's EITC dollars rough)y equal to the city's share of the region's population. The region's lo\+ -income \%orking families .Nere concentrated in and around the cit,* of ,Miami, and in a fe\% smaller cities in southern Dade CoUnt}. A%orkin, poor families could he found not only in Miami, but also to the north in North Miami Hialeah and Opa-Locka, and to the south in I lorida Cite, Homestead, and Leisure Cite. I. Introduction espite it great deal of public and police interest in the �\orking poor Mid \%orkin; families, particularh in the aftermath of vwlfare reform, there is little unclerstandim, of %%ho the \%ork- ing poor are and %%here thev HN e. Families ma) claim an Larned Income Lax Credit (FITC) if'thc� are vcorking but not earning more than roughk 200 percent of the federal V The Miami region had the highest percentage of families earn the EITC (27 percent) among the 27 regions studied. The rate of LI CC receipt in the cite of Miami t 32 percent) %%as the fourth highest among all 27 cities. El The cith of Miami and its region had higher percentages of families earn the credit than other large Florida cities and their regions. I he percent- ilgc of families in the Miami region benefiting from the 1-1IC t27, percent vgas than that in jacl ,ons ille 1s percent and lampa-St. Petersburg ( l6 percent. pmcrth le\el. 1 herefore. this surce\ Uses L.I I ( receipt as it measure of' the number and location of' logv-income ��orking residents in a mctropnlitan area. Phis Miami sur,.e\ is one of a series looking at the LI I C and its �,aluc to 2- regions around the countr�. Lsing IRs data, this sune\ mapped the geographic dis- tribution of the I K to help these regions better understand �%hcre \corking poor 02- 933 3 families in their areas li\c. I'his sung\ confirms that \\orkin; families like tlu-uu�,hout the \lian)i metropolitan are.I, ,Incl that the FI IC is an impor- tant source of income for these f,unilirs incl their jurisdictions_ 35 11. What Is the L V CC" 'I I e I.I I C is a rt! fun(lahlc If I income ta\ credit desi,ned to male work pav for lovv- income families. Con;;ress enacted the credit in 19; � in response to hinh unemplovnunt and the burden that social security takes imposed on lovv-wage workers. Substantial increases in the [VIC \rere apprmed h\ Conl„ress se\eral times Burin, the Lite 19SOs and earls 1990x. lietvveen 1954 and 1996, the amount of dollars transferred to working I'amilies through the credit increased more than 10 times (Finure 1 ). In 1997 oxer 19 million families claimed more than S,0 billion in EI1Cs—an merage of S 1,i67 per Tamil%. The EITC is novc the largest federal aid proUram tar- nyeted to the vyorking poor. 1. How Dues the E1 FC' 116rP The 1.I -IC is a\ailable to families \\ hose incomes range from bcim\ the federal po\crt\ line to rou-,hh double the pmerty line lsee Fi(Iure 2). Fami- lies %kith tvvo children could earn up to 53,SSS in EII C in 2000: families vkith ane child are eligible for a credit of up to ;2 3� ,. \cr\ hm-income \\orkcrs \kith no children are eligible for a sniall 1.1 1 C. II he siie of the credit increases as earnings increase, up to a point, incl then remains constant at a ma\imum level (based on the number of depend- ents) before declining, with each additional dollar of income ,see Fi"are i 1. For e\ample, a household \\ ith t\co children and earnings between 59,700 and S 12,700 vv is eligible for a 5 ,BSS rcf'und for tay sear 2000. Figure I: Earned Income Tax Credit0 Number of Families and .-mount of Credit 197i — 2001 30 !i Number of Families (millions) Total Amount of Credit (billions) 25 I 20 --- 15 10 5 0 1975 1980 1985 1990 1995 2000 Figure 2: Siie of the Credit Relati\e to Earned Income and Number of Dependents, 2000 $4,000 $3,500 $3,000 — $2,500 — -- v $2,000 li U $1,500 $1,000 $500 J $ 3.888 No Children •� One Child Two Children $5.000 $10,000 $15.000 $20.000 $25,000 $30,000 $35.000 [he data anahnd in this sone\ are For [ay years 19()7 and 1995. In these \can. the mu\imam credit a\ailable to Families with tvvo children %lois ahout S1.700. and the mayimum credit For Families \cith one child \\as about S2,2�0. a)AAI _ _i • Ini INIMLIIuA.I IIC ',iiia. Income \ppl\ ing \\orkers must file a t,r\ return and complete SChedUle E IC in order to claim the credit. Fa\pa\ers \\horn the IRS belie\cs are eli,,ihle for the LI R are sent notices it thcv do not com plete Schedule I_IC. These tavpaversie 02- 933 Iv fife amended returns, but lovy- onle \\orkers \\flo are other\\ise exempt from filing \\ill not recci\e iim notice unless the\ complete it ta\ return. 1..111plrners can also make the \chance I-IIC a\ailable to their cmpfo\ees, allo\\ing eligible \\orkcrs to earn ;I portion of' their credit \\ith each pa\check. \carp all falmilics, ho\\c\er, recei\e the credit in their ta\ refund check at the end of the \ear. R. It ho Actuallt Claims the E17 C? In t i I x year 19 9 8, h Il_y..f--IA - 1 i 1-C dol- lars vveat to Families \\ ho eamied less thjan 5i The remainder vyeat to Families earning up jO S29,000. Lamer percentages of eligible fami- lies claim the EI l C compared to traditional social vyeNare programs ( 1:\\F, Food Stamps, Medicaid). Ne\- ertheless, studies haye found thilt manv eligible households. r<Irticulark 6 fanyliesLith yery lovy incomes, former welfare recipients, and those vyith lan- OLUIOC barriers, are not filing for the FC.' Additional research also sho\\s at many of those vyho are eligible have, at best, a vague understanding of' ho\\ the EI FC \\orks. A recent stud\ shovyed than minorities, p r icLL"I\ lo\c-inco_me Hispanic hOLISehol ,, are less likeh to knovy about the =-ITC than love -income non -I lispunic par- ents of any race.' C. It h) Is the E1TC Inrhortrntf? A series of recent studies have pro- \ided strong e\idence that the EMC si(1,nif'icanth reduces I)o\ert\ and income inequality while encouraging vcork and helping lovv income families build assets for the future. I His I amilics Out of 1'o\c-rt\ l he LITUS success in nlo\ ing families out of' poverty is largely attributable to recent increases in the siie of, the credit and the number uf• working fam- ilies eligible for the credit.' In 199,, the I.1IC helped lift ?.1 million peo- e abme the poverty line. By 1999, it f figure had more than c ou 1 ed to 11viii."v tnc'\ & Ali ir,(ruiiiv\ I'm!i ) occupation Child (arc \\urkcrs Security Guards Bakcrs Cooks I ra\el :\rents Table 1: Who Can Get the Credit' Aug. Annual Salary in the nliami Region 4.- million people. In just that one \car, the credit lifted ?.� million chil- dren out of po\crt\—more thin am other federal aid program. Increase, Wfrk FA restricting eligibility to families vvkith earnings, tl promotes work. In 1954, prior to Large increases in t he EI -I C and changes in other fed- eraf transfer programs, 73 percent of' single mothers with children vyorkcd at some point during the vear. By 1996, 8 1 percent of single mothers vyere vcorking at some point during the year. One study found that three-fifths of this increase in workforce participa- tion by single mothers vvas attributable to increases in the H I C.' Beseau-chers have also shmyn that the FITC increases work for those vyho previ- oush recei\ed \\clfare." 5upplcmcnts \1a��cs I he vyages and salaries of' the working poor have not kept pace oyer the last 20 ycars vyith those earning larger incorrge•s. De \ spite strong economic gro\\th over the last decade, the income gap between rich and poor has \\idened. In Florida, during the late 1990s, the average before-tay income of a Tamil\ in the bottom fifth ol• the income distribution vyas aground SI 1,500. Adjusted f•or inflation, these families \\ere earning about the saurtc as the\ \\ere during the late 1970,- 's 1 ;.-110 S 16,490 S 18370 S 19,420 S2 2. 140 At the same time, fanllhCS in the top fifth of the distribution had averaoe before-tay income of nearh S12;,000, 36 percent more than during the late 1970s. Iicsearch suggests that the FITC, b\ supplementing the \\a<1es of' love income vyorking Families, has curbed growth in national after-tay income inequalit\ Builds \\calth ;Ind f'urch;fsin FITC dollars represent additional income coming into the conununity, increasing families' purchasing povyer and helping them build assets for the future. The one studv to investigate hovv families tie the FITC found that oyer half of recipients planned to SQL their refunds on inyestnlents IiLQ pit0m, for tuition or other cduca- tional e\penses, increasinL, t eir access to jo ishrnligh car--- r repair., and other transpurtation improvements, mo\in� to it ne\% nci�1hborltood. or Put- til,w IllotleA into a SaAIrl«s iICCUliflt. I he study also found tient the H I helped the lo\\est-income families meet inlllrediate needs such a. utilities and rent.'- 02- 933 )L\1 z--1 . I'll lgr,whl"., • I S1 nn , a Ell Miami PMSA: EITC Recipients as a Percentage of Total Tax Returns by Zip Code, 1998 DADE i s Homestead Florida City Percentage Recipients 2.5 to 10.4% 12.2 to 22.7°a 24.4 to 26.796 27.2 to 31 7°0 33.6 to 44.0°6 45.5 to 53.1% No data Note. Zip codes wrch 'No date" had suppression of data on EITC recipients. Data Source. U.S. Internal Revenue Service. • • Jt11 Ll IC "I s11 Cipit LO%2&7% 1, 161. Findings: The Value of the ITC in Greater Miami his stud\ c\amineS the Spatial distribution of the t_1 I C in the Aliiurni region, \\hich is defined as the NiianLi Prinmr\ Metropolitan Statistical.Arca IPNiS -A). I his arca includes roughl\ 2.2 million people living in Nliemi-Dade Countv_. he I Ii C data used fur this stud\, \\hich arc public]\ a\ailable through the Internal 1342\4211LIC Ser\ice, reflect actual credits claimed b\ ta\pa\crs for the tax years 1997 and 1995 (see Appendix D for further information on the data)." A. In 1997, 210,000 resideltts of the Aliami re; ion ear_necl orwr 5393 rrrilliwi_ ss--feclercil FITC C re unds. Of the 5393 million in LI LC refunds flowing into Nliarni-Dade County in 1997, oyer S61 million vyas earned by vyorking families in the city of Miami one. Particular)y large refunds vyere earned by families living in the :Allapat- t area (S 10.2 million) and the Little Hait/\\i<nvyood�horhoods (S9.4 million). The substantial amounts of EiTC dollars flowing to these small communities contributed to the eco- nomic \\ell -being of \\orking Miami families and their neighborhoods. The Ell C vyas also very valuable to communitieSjuSt north of Nli imi. Lo\\ -income \\orkers in I lialeah and North Miami earned appi-minultel\ S40 million and S20 million in FFIV refunds, respecti\eh. Families in the Gladc\ ic\\'Rro\\ns\ille arca earned credits \\orth near)\ S1- million, and those in Opa-1 ocka earned close to SS million. Smaller cities South of Miami bene- fited significunth from the El LC as vNell. The EI LC boosted the earnings of* a considerable number of vyorking Families in HomesteadLeisure City (S 14 million), Princeton'Narania VS4? million),and Perrine'Cutler 9 million). the a\criwe Lf LC for families in Nliami-Dade ('ountv in 199- vvaS `1. 70. Families in the cit\ of Miami claiming the Ell C earned an ayera,,e credit of' ',-, I ')2, \\pile those in the region's communities outside Nliami earned, on a\eragc. SI,; -S in crc(lits I lie fact that o\er �W percent of refunds in the rc jon \\ere earned h\ families outSide the cit\, and that thetie rami Carnet Ii0her Lt\Y'ra,,e credits, higllli'lht the \clue of the 1.11 ( to conununiticS throughout the region. 13. -17re region's loir•-income tum-kia; tmilies were concentrated in and ar•onrrcl the citt cif ANam , and in a few smaller cities in southern Dade Counts. In 1995, nearly one-third of all taypay- ers 132.3 percent) in Miami earned an LiI C refund. Unlike man\ of the other cities studied in this series, rates of ERC receipt varied little across Miami's neighborhoods. In most areas of the city, more than one out of e\er\ three ta\pa\ers earned an LII C. Only three out of Miami's 14 Ap codes sim less than 20 percent of families earn the EI LC; in three Ap codes in the city's nortimestern section, oxer half of all families benefited from the credit. \\orking poor families lied not only in Miami, but also in other cities throughout Nliami-Dade Count\. I he share of workers earning the EVI C in the city of Hialeah X\ as the same as in Miami -33 percent. In North Miami. an c\en larger share—approximate)\ 40 percent o�all families—received the credit. Evccpt in a fevv small communities a10110 the coast, rates of f_Il C receipt topped 30 percent throu11hout the northern portion of the rev,ion. Large numbers of lovy-income vvorkin, families also lied in the southernmost parts of Miami -Dade County. In the Florida City and I lomestead areas, the EITC boosted the earnings of 30 to 4� percent of all families. B C. 11te Miami region had the highest per•centaue of families earn the LIIC (27 percent) ancon; the 27 regions studied. he percentage of families in treater Miami \\ ho benefited from the LI IC (2-.2 percent) %vas the highest anion, the 27 regions sur\e\ed (see:Appendi\ C). Compared to regions \\ith similar population. the El fC \\as much more \aluable to the Aliami region. For inStance. \\hile the EI 1C contributed S 119 million to the Seattle regions cconomy, the credit returned more than three times that amount to lovv- income \\orkin, families in greater Miami. l lie flovy of EIIC dollars to the .Miami region topped the anunmts in a number of much larger regions studied, incluc in(, \\as iington, D.C., 1303ton and Detroit. \\ ith nearly one-third of all tai filers claiming the EITC, the cit\ of' Miami had a higher percentage of families earn the EiTC than all but three of the 27 cities surveyed (see:Appenck C). Miami's rate of EITC receipt \\as the same as Detroit's (32.3 percent and comparable to that in cities such as Hartford (31 percent) and St. Louis (30 percent). D. 71te citt of .Miami and its region had hi",her perceuta;es of families earn the credit than other latae Florida cities acrd their regions. Although considerable shares of taxpayers in the jacksonyille ( 18.4 percent) and Tampa -St. Peters- hurg t I percent) regions earne(I the credit, the 1:11 C boosted the incomes of an even 1,reater proportion of families in the Aliami region (27? percent). )lie 5393 million in EIIC. refunds flo\\ing into the Miami region in 199- vvas a larger total than that recei\ed h\ lo\\ -income \\orkers in the lacksonyille ('i, 12� million) and Fampa-St. Petersburg(525- millions regions combined. With 32.3 percent of families benefiting from the 1-111 C in 1995, the cit of, Miami vyas also ]ionic to a vgreater proportion of, 02- 933 C-Mil<w, Lmivv A All IIo pmiiy,, I'm i0 ILNi a=.i • [Ili BRI -1,11- 111111C M11 • tll( "IRilI a "Police makers in the Miami region cmi lerertige this investment lry partnering with c011ar111(faity institutions to preserve the value of the FITC, and In, liel ping lo-tt -income 'tuorking families use the FITC to build tissets for the future." \wrking poor families than other lar,,c lorida cities. The percentage of'\)ork crs cirnint, the credit in those cities ran -'ed from I9 percent in St. Peters - bur,,. to 20 percent in Iackswi\ille. to i 1 prrccnt in Camp,. IV' What Miami Can Do to Le\ erase the E ITC Locall\ his stuck confirms that there arc hundred, of 001.1sund, of lm�-inconle corking Families li\ing throughout the Nlianli metropolitan arca, and that the Earned Income lax Credit is a signih- cant fecleral support For these families incl their communities. Policymakers in the Miami region can Ie,erage this investment b. partnering o.�ith conulnu- nit\ institutions to preser,e the \flue of the LITC, and by helping Im\- inconne %%orking fitnlilies use the LI IC to build assets for the future. l here are four things that Nlianli's c01111111 -mi - ties can do right nmc to masinliie the use Incl '.clue of the EI I C. I. Help lou -income ta.tpa}ers learn about and file for the FICC In 1997, the averagc Lal C for Vianni families claiming the credit \�as mer $ I ,�00. Still, e' idea( e— «Csts that nlanx_for thc• credit fail to — ui it. In 2000, the Citv of ( hicaUo launched an educ; 'on and outreach cannpai,n to increase axvare- ness of the EI -1 C amort, logic-v�a,e workers and their- emplmers, and to slake free tav preparation aoailable to ch"ihle families through volunteer or<,aniiations. I hc- rmign also alerted enlplrncrs that their I(mcr- ��i1ge t%o�ic)uld I'or the W 111c— , C Xv hich, b% nIdditl, a por- tion of the Ilue of a %vorker's anticipated EI IC to each pa'check, sere, to boost the take-home pa\ of clwihle families throu,llout the \ear. ?. Support corunrunitl or(yani_atiort' that pre�ser-te the value of -the EC►CO \ccordin, to rc,earchcr,, mcr half of Al Limihes \\Ili) the fcller,ll I I I ( file their ta\e, through a t,r\ preparation scr\ice. ' L nfortunatch. nlan\ of thcsc sen ice s charge' an e\or- bitant fee and c\en offer "refund anticipation loan,..: high -interest loan, that—often for 5100 and nu)re—t,i�r ta\pa\crs their mmne\ ooh a cl,)" sooner than the (reason ould. l he Center for Lim Ind I lumen Scnice's fay Counselint, Project Incl the lay \ssistance Project in C hicago. is l\ell as the Commtmit� Action Project of Culla Countv in Oklahoma, are evam- ples of omanirttions that are helping ECIC recipients N�ho need assistance in filing, their returns to recci%c the full %aluc of the credit. States and localities can also hep recruit Xolun- teers for the IRS \olunteer Income lavAssistance I\ FIA) program. ��hich provides free i11diideal tai 1)repanI tion for taxpavers claimint, the EFIC 3. l►elp fumilies use the EITC as oil oateival to fmancial services According to the Federal Resenc. 22 percent of families cxith lessLia,m S?� 000 in inconit, !tht• majority of the 1 1 1 0-elillihle population) lacy J I nk account of am kind. R, not Ilav in;, this most basic access to nrainstreanl financial sen ices, these flllllhe, nntst often reh on high-cost check_ cashing or other alternatioe financial services that consume large portions of their S111.111 incomes. and make it evrn more difficult for them to put aside small amounts of say irws for the future. I he a\cra,e federal I I C( refund in \11;111)1 of S 1 .:;-0 represents a lame initi� deposit that. with cooperation from local hanks and credit unions. could help mane loloer-income fami ics open an account and begin to build modest amount, of sa\ in,s. Some states and countie,, including those in California incl MiSSnurl. are vworking vkith hunk, to make lo%x-cost accounts avIilablc t0 02- 933 a)LAI !_.i . IIll LR4)O 1A(,S [—II �iiu� • I.I I( ,i r.n. t r Iii 't- .i,�� S Vii ii;�,r�,i;�. �� I'- I'' families making the transition from •1elfare to (Mork. Cities and to\�ns in the Miami region, as \\cll as the state of, Iloridu, could make similar efforts un behalf o} "unhanked" Imc income \%orking families, making it possible for them to recckc their tai refun(IS \ is Direct Deposit. 4. lse local data to identib eli('ihle lirnrilies who are not claimillo the EI IC \\ hile significant percentages of" xvork- ing families are a\\are of and Idle for the H I C. ne\\ entrants into the labor force—especialh indi\ i(.luals making the tr uisition from mdfso-e to uork— mac not be imare of the credit. Data from the IRS could make it possible ,vfor re`�rs to idea ' '. nr•ighhor- W.� hoods where EI fC participation rates arere Ll 11 t these :mens for outreach. Using this t\pe of" data from the Wisconsin Department of ReNenue, researchers at the L nkcr- Sitv of'Wiseonsin's E_mplrnment and lrainin, Institute erre able to idcntik neighborhoods in \lik(nukee (\here Irnv percentages of the lovv-income families filed for the I.II C. " \ppendi.x A: \clue of Claimed EI ICs for the Miami Region, 199 County Ualue of EITCs Claimed share of Regional Total value share of Regional Of EITCs Claimed Population \liami Dade 5393,101,000 I OO'r 1 O0`( tiutn'( C: lute? )nrl Rc:rin:c Scrricr, ISIS)- LIP ( ude bile.. • Appendix B: Profile of EITCs Receised for the Miami Region, 199S County Aug. Adjusted Total (lumber Total Number % of Taxpayers Gross Income of Returns of EITCs Claimed Filing for EITC Nliami-Dade 560,560 909,419 ? i -.00h ?-?(C 1..w(c: luleru'll RPle)llle Serio- F -f ill I)cm ',ailrllie,. 0 • ( ! N I! is ON Lr:i: \\ S \Ii i r,nrot i i \\ Poi i, 02- 933 Appendix C: Estimates for 27 Regions and Cities Region Central City % of Taxpayers uaiue of % of Taxpayers Ualue of Filing for EITC EI1Cs Claimed Filing for EITC EITCS Claimed (millions (millions of Dollars) of Dollars) City snare of Regional EITC Ualue Won 11.2 54.3 20.E _.., Atlanta 13.5 423.2 23.4 67.0 Baltimore 13.9 242.1 28.0 123.0 Roston S.9 321.8 13.1 33.4 Dem er 10.7 147.0 16.9 32.0 Des Moines 9.8 29.2 13.6 14.0 Detroit 11.8 344.2 32.3 161.3 Gare 13.2 37.3 33.6 19.0 "Grand Forks 1 1.6 7.0 1 1.7 4.2 1lartford 8.8 63.1 31.6 20.6 Indianapolis 12.9 146.0 16.4 85.6 Los Angeles 21.2 1236.1 24.6 309.0 Louisxille 14.7 103.8 24.0 41.1 Macon 22.6 34.6 33.2 20.7 Miami 27.2 393.1 32.3 615 Milwaukee 10.7 116.7 21.9 75.7 \exp Orleans 23.4 233.6 36.0 123.2 Oakland 9.3 130.7 15.9 Philadelphia -Camden 12.2 403.4 24.1 209.3 Pro%idence 12.6 74.3 23.6 26.3 Saint Louis 13.5 232.4 29.6 70.7 San Antonio 2 3. 0 264.9 24.9 193.9 San Diego 14.3 233.3 14.4 113.5 San Jose 7.9 53.6 1 1.1 47.4 *Savannah 21.6 44.0 24.2 33.7 *Seattle S.2 119.1 S.7 36.3 \�ashington D.C. 10.8 362.3 15.9 76.9 Median for all 27 Regions: 12.6 S146.0 24.0"� S53.4 Soave: Internal Rei ome Serti(e `Deuute"a central ,ih It /WrC'a i.arpe percrut.a e raj _ih cucle. extend hc')nrnl the naauairil"d I ... mid.arir". tire1) 31.1 1 3.S 30.5 16.6 35.4 -47.9 46.3 33.1 60.1 31.6 60.7 -41.1 38.8 35.0 15.6 67.4 49.3 27 31.9 3 3. 6 28.0 74.0 44.9 33.E 51.3 30.3 21.2 41.6rC r� U City snare of Regional Population 31.-4 20.6 9 3 26.3 44.-4 21.5 17.8 46.7 49.4 39.1 23.5 33.9 17.4 40.0 33. •16.11 29.-4 16.7 13.5 7 3.9 44.0 32S 48.7 2 3.3 1 1.3 26.6rC F- -I L J I��r, z__i tau Riaun�a�n, Iv�IIILTitIv tillC L.nii C �n n n� l.�, 2 S VIl �i��'y{i •appendix D: Methodology he data for this studN xNere derixed from tNo IRS files (described belo�N ). 'I his stud uses it 1995 file to map the percentage of' ta\ptners \\ ho recckcd the EI IC. In order to determine the actual amount of* EPIC dollars that \\ent into each jurisdiction, \%r needed to use it more detailed data Dile. I he 199- IRS Apcodc Dile is the most recent \ear for t\ hich these detailed data are available. l he 199- file contains information by sip code on the total number of inclMdual income tax filers, the num- ber of filers vv ith certain tax items (salaries and Mages, interest, Schedule C. Schedule F) and total amounts for those items for tay vcar 1997 returns. .-\mons these are the number of filers \\ho claimed the Earned Income Credit. and the total amount of Earned Income Credit claimed. We used these data to calculate the mount of Earned Income Credit that lm%ed into each count in 1997, as vicell as the average EI"TC amount per count. The data are mailable online at http://-,%-\%-\%.irs.gov/tax_stats/soi/ zip-codes.html. The 1998 file contains similar infor- mation by zip code, including the total number of filers and the number of fil- ers claiming the FITC, but does not pro\ide the total amount of EITC claimed per zip code. Since these data v+ere for it more recent tax vear, vve used them to calculate the percentage of filers recei)ing the EIEC in it omen zip code, and throughout it omen count. These clata are based on returns recei\ed b\ the IRS bet\een 1anuarn 1, 1999 and December ; 1, 1999; nearh all of these returns v%ere for tax vear 1998. The data are mail- able online at http://\%-\%%%.irs.go,./elec_s%s/ demogrfs.html. • \Ithough the rim data are reported at the zip code Iev el, most of the data in the stud\ are characterised at the count\ or cit le\rl. to calculate the county totals vac simple aggregated sip code~ based on the count names pro- \idcd in the IRS file. Estimating accurate totals for smaller levels of „eograph\, i.e. cities, \\as more diffi- cult. Recause sip codes, are determined I)\ the United States Postal Scr\ice and are desitoned to facilitate the deliv- cr\ of mail, their borders gery often do not coincide \\ith municipal bound- aries. In some cities, sip codes more or Tess match the actual jurisdictional lines; in others, sip codes that co\er fame parts ol' it cit e\tend \+ell into neighboring cities and to\\ns. \\e used GIS (Geographic Information S\stem) to determine «hich zip codes fit ��ell enough (+ithin it gi\ en city's bound- aries to associate (\ith that cit. If a zip code's center \\as inside the city's boundaries, then the zipcode �\as included. In a fety cases, xyhere there erre a large number of zip codes that extended he\ond the city's boundaries in an unusual manner, xte included all zip codes that erre vNithin, or inter- sected with, the city's boundaries. In these instances, the total amount of EIEC flo\ting into the central cit mai be slightl\ overstated, but the regional totals are as accurate as for other regions. These cities are marked \\ith an asterisk in Appendix C. 41 Endnotes I he rU iuns intluded in this stmc\ scrirs \% ere SC ICC ted beL,uue thc\ arc arras \k herr the \nnie E. C.ue\ EoUnd,ltlnn ,incl 1,1111 S. Knight I oundation ,ire imohcd in miti.i- tkus aimed at impro%ing thL Ii\LS or \%orkim, poor families. 2 I hr 'l l U rcfcrcnLrd throul.hout this sor- ,c\ is the federal I .treed In(IIMe IJP Credit. .\1I rLIcR'lit ('] ter I I f( s el.iimcd nr the %clue of I-1 I (s claimed are fnr the tas vear to �hich v%c rcler. 3 Da%id Campbell. \lichael Parisi. and Brian Ball,mic 120001. "Individual Income Ian Ncturns. 199S. ill li?tlLN oI IIIC(MIC Bullets,. I dl ?000- LS Dt-partmcnt of the I reason. 4 See John Karl Scholi 11994 1. "I he I_irn(d Income I:u C redit: Participation. ( ompli- anee, and:Antipmert E.ffecticeness.. \ahnrk+l LIA: Jutn-nal 38: 64—s�. Schub I'uund that kcmcen Rs, and tib percent of those elillible actualk claim the credit. I lis studv vurs based on 1990 data. Sicr,nificant increases in the vtitle of the EI I C hate probabh altered actual participation rates. :Also sec C arohn 1. Bill. A. Joseph Iioty. Charles II. Alullin. John Karl Scholl i 10991. I I I C I ligibilit. Participation. and Compliance Nates for \1 D( IIousChnlds: I vidcnce from the California Caseload http://s%ssx%.jcpr.orgA%pfilesrhot„_eitc.pdf hathcrin Noss Phillips !2001 . "\\ ho I novvs:AboUt the Earned Income Tai ( redit-” Lrhan Institute. http://ne%%fcdcralism.urban.ur "html% series b.1i_/b2-.html 6 Neuviceti I99 i and I `I`t9. the number of families reccicim, the 111 ( int rc.tscd hA 29 percent. I he number of people lilted out of' pmcrt k the I I I C inc r(. cd h� 124 percent 0\ Ur the same time period. 02�. 933 Crsiiw( ,s Lit r,ts A AIi IW)Puti1\ \ Potnt IL \1 .c.r - IIH 131t0otiisc.s Issrncnos • I=11( siren.. a Ell - I he increasing contribution of thr f 11 ( to the ,afetc net contrasts sharph kith trend, in other tcdcral aid programs in the Nt)Os, Social ,ecmritx insur,uuc, for c\.umplc. lilted 100,000 Tess pcoplc nut of pocertc in 19`)`) than it did in 1993. 1 011d helped about (10,000 Ie„ pcoplc in 1 1)`)9 th,m in I`)'):. \nd mean, -tested cash bene lits, mainlc I \\I. lilted (100.000 Ics,. `sec "Pocertc and Income Trend,: 1999 " ( c n to on Budget and Pollc\ Prioritic,. ri for incrc.i,c in labor market participation see \,ala I issa and leffe•re\ I ichman i 199111. 'Tabor Supph Response to the Earned Income Credit." Onarterfi Juuru,il f Lcurrunricv. (Al. 60�-637. Another set of estimates by Bruce .Alecer and I)an Rosenbaum supygest that more than 00 per cent of the increase in :ucnual emplocment of single mothers was due to increases in the EI I C. \lelfare ccaieers contributed one-si\Lh and AU D( benefit cuts about one-ei-11th, Changes in Medicaid. emplm- nent training. and child care programs placed a smaller role. 11111):%!dsLnhccnrgtpaper,hr� ;63.pdf 9 \. Joseph I lot/, Charles 11. Mullin. and John Is. Schol/ (20001 . -I he Earned Income lay Credit and Labor .Market Participation of }amilics on A\ellare.- loint (enter on Pocerh Research. 11111):/,tvcvcvc.jcpcoro sspfilcs/hot/_rnullin- schol/_final.pdf 10 1 he inconic distribution, he state are from the Current Population Sttnec. I he data Leri pooled for larger sample Si/L's. I he v-c•,Ir, anah/ed were N-S-19ti0 and N,)h-1995. See Jared Bernstein. Iluaheth ( . McNichol, f.mererl-- \libel, and Robert /ahradnik 12000 "State -he -State \nalcsis of Income -rend,." ( enter on Budget and Police Priorities ;rnd I'_c On Om11C Polio Institute. h[[1):/'seaccr;cbpp.or�/ 1-1 `9-00sfp.1itm. I I f eltrev B. Licbman 1 I91)S'. "I he Impact of the I ,irned Income ( rcdit on In'elltl,e, .incl Income I)i,trihution. " hrom Irl\ Police ,111,1 the Lcnrnnnt, Airlume 12. Potcrha, Lditor'. \II I pre— 11111):%%cc cc\c.hsg.hanard.edu,' jt•ffrrvlirbmar>,'tpnreitc.pdf 1_' linurthc \I. Snlecding. h.rtherin 110— Phillip,. and Michacl O (onnor I20001. l he I I I C: fyu•ctation, hnocc lcd,,c, lsc, ,rnd I conomic and Soti,iil \lohility ( cntcr for PnliLc Bcscarch. \lurking Paper Series \o. I;. http://resss+-cpcm:ra\ccll.scr.cduipdf; vcp 13.pdf I The IRS data on the I I I C, and the dat;I presented in this sure\, reflect credit, claimed, incl not necessarih dollars refunded. Some Ef R offset. tav meed, and does not result dircctlr in i refund. I he memlielming majoritc of credit amomits claimed are, hoccecer, refunded to taypacers--in 199-, mer SO percent of all I:I I(amounts ccere refunded. 11 'Tio-ned Income la\ Creclit: Profile of (,I\)ear 1991 Credit liceipictits, General \ccounting Office. GAO'GGD-911-1?313fi. 11111):'cccccc.arcess.,po.c,m',u_does-ace,"nee sl60.shtml: "\ationcide \n:rhsi, of the Individual fa\ Return Records for Partial lav )ear 199ti " II1IC'rn,I1 Revenue tiervILC Publication 3193. http:'/ftp,fedccorld.go%/pub,'irs-utl- p3493.pdf. I i \rthur R. kennickell. \lartha Starr- McClucr. and Brian Surc•itc. "Recent (ham,es in C.S. Iamih I in.rncc,: Kc,ults from the 199," 1ur,ev of the (on,umcr IJanu�tr-N 2000. in.uecs.' 1r,h'r,I( fir.rru' liallrtin. I Loi, M. Quinn and john Paccas,tr.It 2001 ..IIII' Alihcaukec \ci,hhorhood Indica- tors \,set Xhppinc, project: Ernplocment and Incormc Growth in Central Cih Mil- cc.mkec \ci,,hhorhood,. Cnicersit\ of \lisrnn,in--\lilccaukrc, I.mplo\nxcnt and Iramin, In,tautr. http:cccccc.uccm.edu"Dept.L11 reports doi-99.1tm 02- 933 ©ILII ,--I•Ito 135uu)Kn,.,II,IIILIn„•IIIC~)lois C ! N ,,-C-:L�,S \1::r:„rnjI[,,11,,',,,,. B . \ckno%%ledgements he Brookins Center on L rban and Nletropolitan Polic\ ��ould like to think tile.\nnic F. CascN and John S. and Iames I . kniOht foundations for their (,onerous support of our \\orl, on \korkino Family imestments and policies. \\c k\ould also like to thank lcnnifer John bare, Michael parr, Ruh Greenstein. \icholas lohnson. Mich;iel I arac\. John Monahan..\ndrea Dane. John Pa\\asarat, Isabel "imhill. and Irene Sl.ricki For their comments on carp drafts. • I or More Information: Van kcmbe Senior Research Anahst Brookins-, Center on Lrban & Mctropolitan Policy Phone: ?O?) Email aberubeCbrookin;s.edu Renjnmin Forman Research Assistant Brookin�os Center on L roan & \letropulitan Policy Phone: ( 20 2) 797-1,400 Email: bforman �r brookins.edu Note This sure\ is a\adablc on the Brookinos Institution's mcebsite at: N%-,ti-\%.brookinns.edu/urban. -\]so Mailable are similar sune\s for ?t-) other metropolitan regions. s, \Iiii-I"r 1ii��Pniii, �L�t _c_i IIH Iljt,1 �110ZIJILIi(��•11I( 6 THE BROOKINGS INSTITUTIONT 1 -i Massachusetts A% ��V• ��ashinntun D .C. 20036-2 l tiff Tel: 202-797-6000 • Ear: 202-797-6004 w%,.-%%. brooki n,(,,s.e clu CLVI1 11 ON URBAN & NIe1110POt-1-1 .N Pot -ICI I)l111-.cr:-c2-797-6i;y • I��,iuii;i c -i: ���--y--'y6; 02- 933 Low-income Hispanic parents are much less likely to know about the program than low- income non - Hispanic parents of any race. Who Knows about the Earned Income Tax Credit? Katherin Ross Phillips The Earned Income Tax Credit (EITC) is the largest cash transfer program for low- income parents in the United States.' The refundable tax credit supplements wages and offsets taxes paid by low-income workers. Research suggests that the EITC has not only been effective in moving fami- lies over the poverty line, but it has also encouraged work among single mothers (Eissa and Hoynes 1998; Meyer and Rosenbaum 1999; Porter et al. 1998). Recipients use the money they receive from the EITC for investments in education and savings as well as to help them pay bills and daily living expenses 2 The EITC is administered through the federal income tax system. To receive the credit, low-income workers must file a tax return, even if they are otherwise exempt from doing so. As a result, knowledge of the EITC is essential if all eligible, low-income parents are to receive the credit. Furthermore, the EITC can only influence the labor supply of low-income parents who know about the program.' Although the federal government and many advocacy groups have designed outreach programs to increase program participation, relatively little is known about whether potentially eligible recipients are aware of the EITC. Using data from the 1999 National Survey of America's Families (NSAF), this brief examines demographic differences in knowledge about the EITC among parents across three divisions: (1) income and wel- fare participation; (2) marriage and educa- tion; and (3) race, ethnicity and citizen- ship.' Nearly two-thirds of all parents have heard of the EITC and just under 30 per- cent of parents have received the credit at some time. Low-income Hispanic parents are much less likely to know about the pro- gram than low-income non -Hispanic par- ents of any race. Among low-income par- ents who know about the EITC, Hispanics are also less likely to have ever received the tax credit. Past welfare participants are more likely than current recipients or par- ents who never received welfare to know about the program. The Earned IncomeTax Credit The EITC program was implemented in 1975 to help offset the Social Security pay- roll taxes paid by low-income working par- ents and to encourage parents to work. Over the past 25 years, the EITC has grown dramatically through a large increase in benefits and expanded eligibility. In 1998, non -administrative program costs for the EITC were $30.8 billion (IRS 2000a). During that year the EITC was responsible for lift- ing more children out of poverty than all other means -tested programs combined (Porter et al. 1998). The EITC is available only to low- income tax filing units (individuals or fam- ilies) with earnings. While the EITC is pri- marily for parents, there is a small credit for low-income workers who are not par- ents. For all EITC recipients, the size of the credit initially rises with earnings, reaches a plateau, and then diminishes with each additional dollar earned. The maximum credit for a working family with two chil- dren was $3,756 in tax year 1998. Families 02- 933 Nationally nearly two-thirds (65.9 percent) of parents know about the EITC. with two children and incomes between $9,390 and $12,260 could claim this maxi- mum credit and families with two children and incomes up to $30,095 were eligible for some EITC benefit.' Low-income workers have two options for receiving the EITC. They can file a tax return with a schedule EIC at the end of the tax year or they can apply to receive a portion of the credit in their paychecks throughout the year. Very few workers take advantage of the advance payment option.' Low-income workers who do not file an income tax return will not receive any benefit from the program. Furthermore, low-income workers who do file a return, but do not claim the EITC on their return, might not receive the credit.' Income and Welfare Participation Nationally nearly two-thirds (65.9 percent) of parents know about the EITC (table 1). Given that the EITC is targeted to low- income adults, it is reasonable to assume that low-income parents are as knowl- edgeable about the program as higher - income parents. The first column in table 1 shows this is not always the case. The knowledge difference between parents with incomes above 200 percent of the fed- eral poverty level (FPL) and parents whose incomes are near the FPL is not sta- tistically significant.' However, very poor parents, those with incomes below 50 per- cent of the FPL, are significantly less likely than higher -income parents to know about the EITC (54.6 percent compared with 66.9 percent). Very poor parents are less likely to have worked during the last year and, therefore, less likely to be eligible for the EITC. Parents who received Aid to Families with Dependent Children (AFDC)/ Temporary Assistance for Needy Families (TANF) or food stamps in the past, but who are no longer participating in the pro- grams, are very likely to know about the TABLE 1. Parents at Various Income and Program Receipt Levels Who Heard of and Who Ever Received the EITC, 1999 Source: Urban Institute calculations of the 1999 National Survey of America's Families. ** Significantly different from comparison group at 0.01 level. * Significantly different from comparison group at 0.05 level. a. Base category for statistical comparisons. 02- 933 Heard of the EITC (%) Ever Received the EITC (of Parents Who Have Heard of the EITC) (%) Ever Received the EITC (All Parents) (%) U.S. Average 65.9 45.1 29.5 Family Income as Percent of Federal Poverty Level Less than 50% 54.6 ** 49.0 ** 26.6 50%-100% 65.7 68.6 ** 44.8 ** 100%-150% 64.5 75.0 ** 48.0 ** 150%-200% 68.3 69.6 ** 47.1 ** Greater than 200%4 66.9 32.7 21.7 TANF/AFDC Use Current 61.6 54.2 ** 33.3 ** Past 82.9 ** 78.9 ** 65.3 ** Never' 63.7 38.5 24.3 Food Stamp Use Current 66.7 62.2 ** 41.3 ** Past 77.7 ** 75.1 ** 58.1 ** Never, 62.3 31.6 19.4 Source: Urban Institute calculations of the 1999 National Survey of America's Families. ** Significantly different from comparison group at 0.01 level. * Significantly different from comparison group at 0.05 level. a. Base category for statistical comparisons. 02- 933 EITC program. Across all parents, past AFDC/TANF participants are significantly more likely to know about the program (82.9 percent) than either current partici- pants (61.6 percent) or parents who never received AFDC/TANF benefits (63.7 per- cent). The same pattern holds for Food Stamp participation. Among those who have heard about the EITC program, 78.9 percent of past AFDC/TANF participants and 75.1 percent of past Food Stamp par- ticipants have received the EITC. Not surprisingly, parents with incomes between 50 and 200 percent of the FPL are significantly more likely than higher - income parents to have ever received the EITC. The second column of table 1 shows that three-fourths of parents with incomes just over the FPL who have heard about the EITC have received program benefits. Although knowledge of the program spills over into the higher -income group of parents, receipt of the benefit is limited to low-income workers. Hence, the remainder of this brief focuses on parents with incomes below 200 percent of the FPL.' Marriage and Education Past research has found differential effects of the EITC on the labor supply of parents based on their marital status: the EITC is related to increases in work effort among single mothers and, to a lesser extent, decreases in work effort among married mothers (Eissa and Hoynes 1998; Meyer and Rosenbaum 1999). Interestingly, knowledge about the EITC also differs by marital status. Marded low-income parents are less likely than non -married low-income parents to know about or receive the EITC (table 2). Among low-income parents who have heard of the program, divorced/sepa- rated parents are the most likely to have received the tax credit. Low-income parents with some college education are the most likely to know about the EITC and to ever have received the credit (79.9 percent). In contrast, less than half of low-income parents who did not finish high school know about the pro- gram (44.4 percent), and less than a third have ever received benefits from the pro- gram (26.5 percent). When we look only at low-income parents who know about the program, those who did not graduate from TABLE 2. Low-income Parents (Income below 200 Percent of FPL) with Various Characteristics Who Heard of and Who Ever Received the EITC, 1999 Source: Urban Institute calculations of the 1999 National Survey of America's Families. ** Significantly different from comparison group at 0.01 level. * Significantly different from comparison group at 0.05 level. a. Base category for statistical comparisons. Past AFDCFANF participants are significantly more likely to know about the program than current AFDC/ TANF participants. 02- 933 Heard of the EITC Ever Received the EITC (of Parents Who Have Heard of the EITC) Ever Received the EITC (All Parents) U.S. Average 64.2 67.8 43.2 Marital Status Married° 59.3 65.9 38.5 Widowed 63.3 71.3 45.1 Divorced/separated 73.3 ** 73.0 * 53.4 ** Never married 67.7 ** 68.7 46.3 ** Cohabitors 63.3 63.6 40.1 Education Less than high school 44.4 ** 60.1 ** 26.5 ** High school graduates 69.3 71.8 49.5 Some college 79.9 ** 69.1 55.0 College + 68.5 60.1 ** 40.7 Source: Urban Institute calculations of the 1999 National Survey of America's Families. ** Significantly different from comparison group at 0.01 level. * Significantly different from comparison group at 0.05 level. a. Base category for statistical comparisons. Past AFDCFANF participants are significantly more likely to know about the program than current AFDC/ TANF participants. 02- 933 TABLE 3. Low -Income Parents (Income below 200 Percent of FPL) Who Heard of and Who Ever Received the FITC, by Ethnicity, Citizenship, and Interview Language,1999 Source: Urban Institute calculations of the 1999 National Survey of America's Families. Note: na = not applicable. -Significantly different from non -Hispanics at 0.01 level. * Significantly different from non -Hispanics at 0.05 level. The ethnic difference in knowledge about the program might arise from a lan- guage barrier. Although the Internal Revenue Service (IRS) publication about the EITC is available in Spanish, the notice that the IRS sends out to potentially eligible tax filers who did not claim the credit is avail- able only in English. The bottom half of table 3 shows that low-income parents who had the NSAF administered in Spanish are significantly less likely to know about the EITC program than low-income parents who took the survey in English (15.4 per- cent compared with 71.7 percent). Even among low-income parents who had the survey administered in English, Hispanic parents are still much less likely to know about the EITC or to have ever received the credit than non -Hispanic parents (53.6 per- cent compared with 74.2 percent for knowl- edge, and 37.2 percent compared with 51.0 percent for receipt).10 Conclusion For the EITC to meet its goals of encourag- ing and rewarding work among low- income adults, it is very important that those eligible know about the tax credit and its benefits. Almost two out of three parents have heard about the EITC, and parents with incomes near the poverty line and past welfare participants are among the most likely to know about the pro- gram. These results suggest that knowl- edge about the EITC is fairly well -targeted toward currently eligible parents. Specific subgroups of the population, however, are less likely to know about the EITC program. Low-income Hispanic par- ents are less than half as likely as low- income non -Hispanic parents to have heard of the tax credit. In addition, very poor parents, those who are the least likely to have worked recently, are less likely than higher -income parents to know about the program. Furthermore, although the EITC can help provide an effective bridge from welfare and Food Stamp participation toward economic self-sufficiency, current welfare and Food Stamp participants are less likely to know about the program than are former recipients. Demographic differences in knowledge These knowledge differences translate into differences in receipt rates. Q�:- 933 Heard of the EITC M Ever Received the EITC (of Parents Who Have Heard of the EITC) M Ever Received the EITC (All Parents) M Native -Born U.S. Citizen 73.2 69.4 50.5 Non -Hispanic 75.7 69.3 52.2 Hispanic 53.2 ** 69.4 36.5 ** Naturalized U.S. Citizen 37.9 61.3 22.9 Non -Hispanic 48.5 63.1 30.1 Hispanic 29.6 ** 59.1 17.3 Not a U.S. Citizen 21.6 42.8 9.1 Non -Hispanic 47.2 63.3 29.7 Hispanic 16.5 ** 31.3 * 5.1 ** English Interview 71.7 69.2 49.3 Non -Hispanic 74.2 69.1 51.0 Hispanic 53.6 ** 70.3 37.2 ** Spanish Interview 15.4 26.1 3.9 Non -Hispanic na na na Hispanic 15.4 27.0 4.1 Source: Urban Institute calculations of the 1999 National Survey of America's Families. Note: na = not applicable. -Significantly different from non -Hispanics at 0.01 level. * Significantly different from non -Hispanics at 0.05 level. The ethnic difference in knowledge about the program might arise from a lan- guage barrier. Although the Internal Revenue Service (IRS) publication about the EITC is available in Spanish, the notice that the IRS sends out to potentially eligible tax filers who did not claim the credit is avail- able only in English. The bottom half of table 3 shows that low-income parents who had the NSAF administered in Spanish are significantly less likely to know about the EITC program than low-income parents who took the survey in English (15.4 per- cent compared with 71.7 percent). Even among low-income parents who had the survey administered in English, Hispanic parents are still much less likely to know about the EITC or to have ever received the credit than non -Hispanic parents (53.6 per- cent compared with 74.2 percent for knowl- edge, and 37.2 percent compared with 51.0 percent for receipt).10 Conclusion For the EITC to meet its goals of encourag- ing and rewarding work among low- income adults, it is very important that those eligible know about the tax credit and its benefits. Almost two out of three parents have heard about the EITC, and parents with incomes near the poverty line and past welfare participants are among the most likely to know about the pro- gram. These results suggest that knowl- edge about the EITC is fairly well -targeted toward currently eligible parents. Specific subgroups of the population, however, are less likely to know about the EITC program. Low-income Hispanic par- ents are less than half as likely as low- income non -Hispanic parents to have heard of the tax credit. In addition, very poor parents, those who are the least likely to have worked recently, are less likely than higher -income parents to know about the program. Furthermore, although the EITC can help provide an effective bridge from welfare and Food Stamp participation toward economic self-sufficiency, current welfare and Food Stamp participants are less likely to know about the program than are former recipients. Demographic differences in knowledge These knowledge differences translate into differences in receipt rates. Q�:- 933 Less than half of low-income parents who did not finish high school know about the EITC. FIGURE 1. Low -Income Parents (Income below 200 Percent of FPL) Who Heard of and Who Ever Received the EITC, by Race and Ethnicity, 1999 Source: Urban Institute calculations of the 1999 National Survey of America's Families. high school are no less likely to have received the credit than low-income par- ents who graduated from college. However, both of these groups of low- income parents are significantly less likely to have received the credit than high school graduates (table 2, column 2). Race, Ethnicity, and Citizenship Low-income Hispanic parents are much less likely to know about or receive the EITC than low-income non -Hispanic par- ents of any race (figure 1). Most low- income parents know about the EITC pro- gram (64.2 percent) and a large portion have received the credit at some time (43.2 percent). In contrast, fewer than one in three Hispanic low-income parents know about the program (32.0 percent) and fewer than one in five have ever received the credit (18.4 percent). Among low- income parents who know about the pro- gram, the ethnic difference in EITC receipt is somewhat smaller, but still statistically significant. To better illustrate the ethrtic differ- ence, table 3 shows the percent of low- income parents who know about and who have ever received the EITC by citizenship status, ethnicity, and language of the NSAF interview. Among low-income immigrants, naturalized citizens are significantly more likely to know about the EITC than non- citizens (37.9 percent compared with 21.6 percent). Both groups are much less likely to know about the tax credit than low- income parents who were born in the United States (73.2 percent). These knowl- edge differences translate into differences in receipt rates. More than half of native low-income parents have received the EITC compared with 22.9 percent of natu- ralized citizens and 9.1 percent of non- citizens. Among low-income parents who know about the EITC program, receipt rates of U.S.-born and naturalized citizens are not statistically different. Regardless of their citizenship status, Hispanic low-income parents are less likely to know about or to have ever received the EITC. However, when we take knowledge of the program among U.S. citizens into account, the receipt rates of Hispanic low- income parents do not differ statistically from the receipt rates of non -Hispanic low- income parents (column 2 of table 3). 02- 933 about the EITC program can translate into differential receipt patterns among eligible low-income workers. The receipt rates pre- sented in the above tables demonstrate this outcome for parents and suggest popula- tions that policymakers, government offi- cials, and advocates should target in their EITC outreach programs. Endnotes 1. Nonadministrative program costs for the EITC were $30.8 billion for tax year 1998. Of that amount, $26.3 billion was refunded to recipients; the remainder went to offset taxes owed (IRS 2000a). The combined expenditure of state and the federal government on cash assistance under TANF was $14.6 billion in fiscal year 1998 (U.S. DHHS 2000). 2. Smeeding et al. (2000) and unpublished data from the NSAF. 3. Some tax filers who rely on paid preparers may actually receive the credit without "knowing" about the program. For the 1998 tax year, signifi- cantly more EITC returns were filed with the assis- tance of a paid preparer (61.7 percent) than returns not claiming the EITC (53.3 percent) (IRS 2000b). 4. The NSAF is nationally representative of the civilian, noninstitutionalized population under age 65 and their families. (For more information about the survey, see Dean Brick et al. (1999).) In house- holds with children, the survey interviews the per- son who is "most knowledgeable" about each ran- domly selected child in the household. Through- out this brief the term "parent' refers to the subset of most knowledgeable adults of the sampled chil- dren who are also parents. If the parent who knows the most about a child is not familiar with the family's finances, using this sample may understate knowledge about the EITC. The 1999 NSAF included survey questions designed to measure knowledge about and receipt of the tax credit. Specifically the NSAF asks: 1) Workers with low incomes can sometimes get benefits from the government in a tax refund or added to their paycheck. The program is called the Earned Income Tax Credit. Have you heard about the program? 2) Have you ever received the Earned Income Tax Credit? (asked only of respondents who heard of the program). 5. For comparison, the federal poverty level (FPL) in 1998 for a family of three with two children was $13,133. A single mother of two children who worked full-time at a minimum wage job would have earned $10,712 in 1998. With no additional earnings, this family would have been poor. If they received EITC, the credit would increase their income by more than 35 percent, to $14,468, and move the family out of poverty. 6. Less than 1 percent of all EITC participants use the advanced payment option (Sholz 1994). 7. The IRS used to compute the EITC for low- income earners who appeared eligible for the cred- it but did not claim it. As of 1992, however, low- income tax filers must complete at least a portion of the schedule EIC in order to receive the EITC. Tax filers who appear to be eligible for the credit, but do not claim it, will receive a notice from the IRS. To receive the credit, nonclaimants must file an amended return with the schedule EIC (Sholz 1994). 8. The income thresholds used in this analyses are based on the FPL and the monetary value of the EITC, if received, is not included in the income sta- tus calcuation. 9. The sample is not restricted to workers. The EITC was designed to encourage new entrants into the workforce, but the program can only influence the labor supply decisions of low-income adults who know about the credit. Additional analyses, with the sample restricted to low-income workers, yielded the same pattern of results. 10. The results of multivariate analyses that are not shown here confirm that Hispanic parents, regard- less of their citizenship status, language, education, and other characteristics are much less likely than non -Hispanic, white low-income parents to either know about or to ever have received the EITC. References Dean Brick, Pat, Genevieve Kenney, Robin McCullough -Harlin, Shruti Rajan, Fritz Scheuren, and Kevin Wang. 1999. Survey Methods and Data Reliability. Washington, D.C.: The Urban Institute. Assessing the New Federalism Methodology Report No. 1. Eissa, Nada and Hilary Williamson Hoynes. 1998. "The Earned Income Tax Credit and the Labor Supply of Married Couples." National Bureau of Economic Research Working Paper 6856. Cambridge, MA: NBER. Internal Revenue Service. 2000a. Statistics of Income Bulletin, Spring 2000, Table 2. Internal Revenue Service. 2000b. Unpublished Analytical Table B for the 1998 tax year. Meyer, Bruce D. and Dan T. Rosenbaum. 1999. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers." National Bureau of Economic Research Working Paper 7363. Cambridge, MA: NBER. Porter, Kathryn, Wendell Primus, Lynette Rawlings, and Esther Rosenbaum. 1998. Strengths 02933 of the Safety Net: How the FITC, Social Security and other Government Programs Affect Poverty. Washington D.C.: Center on Budget and Policy Priorities. Sholz, John Karl. 1994. "The Earned Income Tax Credit: Participation, Compliance, and Antipoverty Effectiveness." National Tax Journal 47(1): 63--87. Smeeding, Timothy, Katherin Ross Phillips, and Michael O'Connor. 2000. "The EITC: Expectation, Knowledge, Use, and Economic and Social Mobility," National Tax Journal 53(4): 1187-1209. U.S. Department of Health and Human Resources, Administration for Children and Families. 2000. "Expenditures in the TANF Program in Fiscal Year 1999." http://www.acf.dhhs.gov/programs/ ofs/data/g499/hilites.htm. (Accessed October 5, 2000.) About the Author Katherin Ross Phillips is a research associate in the Urban Institute's Income and Benefits Policy Center. Her research focuses on low-income workers with children. She is currently studying the rela- tionships between parental work and child well-being and the effects of family policy on parental work effort. 02- 933 THE URBAN INSTITUTE 2100 M Street, N.W. Washington, D.C. 20037 Address Service Requested For more information, call Public Affairs: (202)261-5709 or visit our Web site, http: / /www.urban.org. To order additional copies of this publication, call (202) 261-5687 or visit our online bookstore, http:/ /wwwuipress.org. THE URBAN INSTITUTE 2100 M Street, N.W. Washington, D.C. 20037 Copyright © 2001 Phone: (202) 833-7200 Fax: (202) 467-5775 E-mail: pubs@ui.urban.org Nonprofit Org. U.S. Postage PAID Permit No. 8098 Mt. Airy, MD This series is a product of Assessing the New Federalism, a multiyear project to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the pro- ject director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being. The project has received funding from The Annie E. Casey Foundation, the W.K. Kellogg Foundation, The Robert Wood Johnson Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The David and Lucile Packard Foundation, The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, The McKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, The Fund for New Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The Rockefeller Foundation. This series is dedicated to the memory of Steven D. Gold, who was codirector of Assessing the New Federalism until his death in August 1996. This policy brief was prepared for the Assessing the New Federalism project. The views expressed are those of the authors and do not necessarily reflect those of the Urban Institute, its board, its sponsors, or other authors in the series. The author thanks Gregory Acs, Alan Weil, David Wittenburg, and Sheila Zedlewski for their helpful comments and Janet Holtzblatt for her comments and valuable information about the EITC. 02- 933 :1m The Earned Income Tax Credit: Eligible Families at Risk of Losing Benefits by Michael A. O'Connor The Earned Income Tax Credit (FITC) program has grown rapidly during the 1990s to become one of the nation's prin- cipal antipoverty programs. In 1998 near- ly 20 million taxpayers received more than $30 billion in FITC benefits.l Federal expenditures for EITC are twice the amount expended by Congress on the Temporary Assistance for Needy Families (TANT) program and exceed the cost of the Food Stamp Program and the Supplemental Security Income Program.2 According to the Council of Economic Advisors, FITC is responsible for lifting 4.3 million persons out of poverry.3 A startling number of persons, num- bering in the range of four to six million, who are eligible for FITC do not receive FITC benefits. In this article I summarize research on EITC participation rates, that is, the percentage of all eligible persons who receive benefits. I identify some of the barriers to claiming the EITC benefit and analyze the groups of eligible indi- viduals at high risk of losing EITC bene- fits. My comments may be useful to legal services programs, advocacy organiza- tions, and other community groups in starting, expanding, or refining public ed- ucation campaigns, volunteer income tax assistance projects, and low-income tax- payer clinics.4 I. Research on Participation Rates Only two studies of EITC participation rates have been conducted and reported over the past ten years. The first relied on a special thatch of 1990 census data and selected items from individual tax returns linked by social security numbers. One published report on the study estimated that 81-86 percent of all persons eligible for FITC in 1990 received the benefit.5 A second report on the same study esti- Internal Revenue Serv., Selected Historical and Other Data, 18 STAT. ON INCOME BULL. 153 (Spring 1999). 2 U.S. HOUSE OF REPRESENTATIVES, COMM. ON WAYS & MEANS, GREEN BOOK: BACKGROUND MATERIAL AND DATA ON PROGRAMS WiTmiN THE JURISDICTION OF THE COMMITTEE ON WAYS AND MEANS 314, 411, 949 (1998) [hereinafter GREEN BOOK]. 3 COU-NCIL OF ECON. ADVISERS, GOOD NEWS FOR Low -INCOME FAMILIES: EXPANSIONS IN THE EARNED INCOME TAX CREDIT AND THE MINIMUM WAGE 1 (Dec. 1998). The Council of Economic Advisers consists of three individuals appointed by the President to research, analyze, and advise on economic policy issues of national importance. See sidebars to this article. 5 John Karl Scholz, The Earned Income Tax Credit: Participation, Compliance, and Antipoverty Effectiveness, 47 NAT'L TAX J. 59-81 (1994). NOVEMBER—DECEMBER 1999 1 JOURNAL OF POVERTY LAW AND POLICY Michael A. O'Connor is a com- munity fellow, Center for Urban Research and Leaming, Loyola University, 810 N. Michigan Ave., 1017 Floor, Chicago, IL 60611; 773.262.2199; mikeoc ®earthlink.net 02- 933433 Earned Income Tax Credit 434 mated that 75-86 percent of those eligible received EITC.6 A second study targeted Aid to Families with Dependent Children (AFDC) recipients in four California counties in 1993-94. That study relied on county wel- fare administrative records matched with quarterly wage reports to the California Employment Development Department. An additional match was made, via social security numbers, to tax returns. The recently issued report on that study found a participation rate of 42-84 percent. However, for single mothers, the EITC par- ticipation rate was only 42-54 percent.7 Why, especially after years of expan- sion in EITC benefits, should there be such a disparity in participation rates? Despite the dramatic increase in numbers of participants and amount of benefits paid out, several factors lead to a con- clusion that EITC participation rates, as a percentage of eligible persons, dropped during the 1990's. Although a rebound has occurred, participation rates are unlikely to have returned to the 75-86 percent range reported for the 1990 tax year. I base this conclusion on my analy- sis of traditional and nontraditional fami- lies who qualif}, for FITC and on other factors including limited Literacy, lack of affordable and competent tax preparation assistance, and increased Internal Revenue 'Service (IRS) screening to improve com- pliance. II. Effect of 1990 and 1993 FITC Amendments The 1990 amendments to FITC, which took effect in the 1991 tax year, substan- tially increased the amount of the credit and the income limits to qualify for this benefit.8 The amendments also expanded the definition of qualifying child by elim- inating the dependency requirement and by adding foster children to the defini- tion.9 Moreover, the IRS began requiring completion of a new form, schedule EIC. as a condition of claiming the credit. Prior to initiating schedule EIC, the IRS would compute and add in EITC to the refund of eligible taxpayers whose return listed dependents. The 1990 amendments also added separate credits for filers paying health insurance for their children and for filers with a child under one year of age. I" The 1993 EITC amendments eliminated complex add-ons for health insurance and children under one year of age and also expanded benefits as well as qualifying income.11 A new EITC for single individ- uals and couples without children became available, and taxpayers with a qualifying child are not required to fill out schedule EIC in order to claim this new credit.I'- The number of taxpayers claiming EITC jumped from 12.5 million in 1990 to 20 million in 1998. The total value of ben- efits claimed also escalated from $7.5 bil- lion in 1990 to $30 billion in 1998. How- ever, the number of persons eligible climbed more rapidly, and, as indicated by the study of California AFDC recipi- ents, the participation rate declined dur- ing the early 1990s. One reason for the downward shift in participation is that in 1990, the tax year on which the first study was based, the IRS would compute EITC benefits and add them in to the refund of any taxpayer who filed a return with dependents listed. That changed with the 1990 FITC amendments. A new form, schedule EIC, had to be completed in order to claim EITC. A second reason for 6 George K Yin et al., Impruving the Delivery of Benefits to the working Poor. Proposals to Reform The Earned Income Tax Credit Program, 2 AM. J. of TAx PoL'Y, 225, 244 (1994). Carolyn J. Hill et al., EITC Eligibility, Participation and Compliance Rates for AFDC Households: Evidence from California Caseload (April 1999) (working paper of the Joint Council on Poverty Research, www.icpr.org/hotz). 80mnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, § 11111, 104 Stat. 1388, 1388-408. c� 9I.R.C. § 32(c)(3), as amended by Pub. L. No. 101-508, § 11111, 104 Stat. at 138£. c0 Pub. L. No. 101-508, § 11111, 104 Stat. 1388, 1388-408. 1� ii Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, 107 Stat. 312, 433-35.1 12 Id. at 433-35. CLEARINGHOUSE REVIEW j NOVEMBER -DECEMBER 1999 02- 933 the decline in participation rates was iron- ically the expanded reach of the term "qualifying child." The separation of dependency from the definition of qual- ifying child for EITC and the expanded definition of qualifying child substantial- ly broadened eligibility but in ways that ordinary taxpayers (and even tax prepar- ers) did not easily understand. III. Barriers to Claiming EITC Despite active outreach campaigns (see sidebar), low-income taxpayers have a significant lack of knowledge or under- standing about EITC. A recent study in Chicago was based on interviews of more than 800 persons immediately after their tax returns were completed by volunteers. Each of the individuals received both EITC and a refund of overwithheld taxes that averaged $1,795, yet 24.7 percent reported that they were not expecting a refund, and 31.3 percent of respondents with earnings under $9,000 were not expecting a refund.13 Limited literacy among the nation's poor is a significant factor. A national study of literacy found that 40-44 million adults had literacy skills at level 1. An adult with level 1 literacy skills cannot usually perform such functions as locating eligibility from a table of employee ben- efits or identifying and entering back- ground information on a social security application card. 14 A related literacy study found that 40 percent of AFDC recipients and 44 percent of food stamp recipients had "level 1 quantitative literacy skills."15 Limited access to affordable, compe- tent tax preparation assistance is another barrier that limits participation in EITC. Earned Income Tax Crrdir The basic fee for preparation of federal and state tax forms is $50-75, and many private tax preparers offer additional ser- vices, such as electronic filing and "rapid refunds" or bank loans, which can add ..an extra $50-75. These amounts are typ- ically out of reach for a cash-strapped worker who may be living below the One reason for the downward shift in participation is that, with the 1990 Earned Income Tax Credit amendments, a new form had to be completed in order to claim EITC. poverty level. Moreover, these individuals are often under the federal income tax liability threshold and are not legally obligated to file a federal income retum.16 Tax preparation is a totally unregu- lated enterprise, and taxpayers in low- income neighborhoods tend to find pre- parers with varying qualifications and expertise. Volunteer income tax assistance projects operate in every state, but a lack of funding to support recruitment, training, and supervision of volunteers limits their overall reach. In 1996 only 3.3 million tax- payers, a drop of 200,000 from 1995, received assistance from volunteer pro- grams. That figure includes persons, gen- erally limited to those 60 or older, served by Tax Counseling for the Elderly.17 N Groups at Risk of Losing EITC Benefits As highlighted by the study of California AFDC recipients, single mothers entering the work force are at high risk of not clairrung EITC benefits. 18 The number of 13 Timothy Smeeding et al., The Economic Impact of the Eamed Income Tax Credit (ETEC): Consumption, Savings, and Debt tbl. 4 (Sept. 1999) (paper prepared for conference on "The Earned Income Tax Credit: Early Evidence," Northwestern University, Oct. 7-8, 1999). 14 NATIONAL INST. FOR LITERACY, THE STATE OF LITERACY IN AMERICA: ESTIMATES AT THE LOCAL, STATE AND NATIONAL LEVEts 4 (1998) <www.nifl.gov>. 1' PAUL E. BARTON & LYNN jegaNs, PoucY INFO. CTR., LrrERAcY AND DEPENDENCY 15 (1995). 16 For the 1998 tax year, a single mother with two children had no federal income tax lia- bility unless her income exceeded 514,350 and had no obligation to file a federal tax return unless her wage income exceeded $8,950. /{ 17 internal Revenue Serv., supra note 1, at 238. Tax Counseling for the Elderly is sponsored by the American Association of Retired Persons, www.aarp.org. 18 Hill et al., supra note 7. 02— 2— 933 NOVEMBER -DECEMBER 1999 1 JOURNAL OF POVERTY LAW AND POLICY 435 Earned Income Tax Credit single mothers who held jobs in 1997 was 876,000 higher than in 1994, and recipi- ents who find jobs generally earn low wages, typically below $8 per hour. 19 Self- employed individuals who are in low- income positions are also at high risk of not claiming EPIC benefits. Common jobs that are classified self-employed include family -based child care providers and housekeepers. Some individuals operate on a strictly cash basis and do not file tax returns. Others receive payments from government agencies and also receive Form 1099, which reports the income to the IRS. Yet even this group may fail to file a return lest it owes taxes that it can- not afford to pay. Even if below the threshold for federal income tax liability, this group owes self-employment tax of 15.3 percent. Moreover, this group has a relatively complicated tax return requir- ing multiple schedules, with higher tax - preparation fees. Immigrants and citizens for whom English is a second language represent another group with substantial risk of los- ing EITC benefits. Twenty-six rrullion for- eign -born persons are residing In the United States, and about 35 percent of that number are naturalized citizens.20 Undocumented immigrants cannot qual- ify for EITC, but a substantial number of the remainder, perhaps 15 percent, qual- ify for EITC. In addition to language bar- riers, the withdrawal of various public benefits for legal immigrants over the past three years reduced participation in EITC. These changes in entitlements may have created in many legal immigrants a false assumption that as noncitizens they are ineligible for EITC. The definition of qualifying child for EITC eligibility is typically thought of as a biological child residing in a parent's home. The overwhelming number of EITC qualifying children do fit this cate- gory, yet the definition covers several unique groups that taxpayers, and tax preparers, tend to overlook.21 The term `qualifying child" has three components: age (under age 19 at the end of the tax year, or age 19-23 if a full-time student. or any age if disabled), residence (in the taxpayer's home for at least six months but full -year residence for foster child), and relationship (biological child, step- child, adopted child, grandchild. foster child). The following review of the range of persons covered by this extended defin- ition of qualifying child demonstrates the potential numbers of families at risk of not claiming EITC benefits. A Foster Children The 1990 EITC amendment expand- ed the definition of qualifying child to include a foster child.22 This category is quite large and is at very high risk of los- ing benefits. In the context of child wel- fare programs, there are over 500,000 fos- ter children in the United States.23 Not all reside in a single foster home for a full calendar year, and not all foster families have qualifying income. However, the demographic profile of foster parents his- tontally has had a blue-collar tilt. and dur- ing the past eight years large numbers of foster children have been placed with rel- atives who are generally of a lower- income background. More than 100,000 foster children are likely to be "qualify- ing children" for EITC purposes. Until 1999 the IRS prohibited foster children placed by child welfare agencies from being claimed as dependents, and so a common myth among .both filers and many preparers is that foster children are not "part of the picture" when preparing a return. 19 SHARON PARROTT, CENTER ON BUDGET & POLICY PRIORITIES, WELFARE RECIPIENTS WHO FIND JOBS: WHAT DO WE KNow ABOUT THEIR EMPLOYMENT AND EARNINGS? 5, 9 (1998). 20 BUREAU OF THE CENSUS, CURRENT POPULATION REPORTS, THE FOREIGN -BORN POPUL471ON IN THE UNITED STATES: MARCH 1997 P20-507 (Mar. 1998). 21 I.R.C. § 32(c)(3); INTERNAL REVENUE .i ERV., PUBLICATION 596, EARNED INCOME TAX CREDIT 10-12 (1998). 22 See supra note 21. 23 GREEN Boor, supra note 2, at 777. 02- 436 CLEARINGHOUSE REVIEW I NOVEMBER—DECEMBER 1999 933 I ) For the IRS, the term "foster child" includes any child the taxpayer takes care of as his or her own child and who lives in the taxpayer's home for the full calen- dar year.24 This definition, in an era of extended family relationships, cover&,5ev- eral million children living with aunts, cousins, and even unrelated family friends. The need to list a niece on sched- ule FITC as a "foster child," not as "niece," is barely recognized even when making an effort to claim the benefit can be advantageous. EITC eligibility also can occur in so- called TANF child -only cases. More than 20 percent of the children on TANF are in child -only cases, and in some states the number approaches 50 percent of the caseload. Nationally the number of TANF child -only cases is 1.8 mdhon.25 Some of these cases have an undocumented par- ent, who is ineligible for both TANF and FITC. However, a substantial number of the children in child -only cases are resid- ing with a relative, such as an aunt or great aunt. Because income of the care- taker is not considered in computing TANF benefits, a substantial number of caretakers are likely to have qualLf}-ing Income. Because the child is viewed as supported by public benefits and may not qualify for listing as a dependent, the child is often considered irrelevant to the care- takers tax return. B. Grandchildren Four rrullion children have a grand- parent as a primary caretaker.26 Of these grandparents, 66 percent of grandfathers and 51 percent of grandmothers were employed at some point during the year Although not all households had qualify - Ing income, a very substantial number qualify for FITC. Lower-income grand- parents (and their tax preparers) may Incorrectly disregard grandchildren who are supported by TANF or other public funds as urelevant to their tax return. Even Earned Income Tax Credit though residency and not dependency is the critical factor for qualifying -child sta- tus for FITC, some grandparents fail to claim Lfus benefit. C. Students, 19-23 A child, grandchild, adopted child or foster child can be a qualifying child for the EITC program if 19-23 years old and a -full-ume student." More than 14 mil- lion persons attend institutions of higher learning, and eight million are full-time 24 See supra note 21. 2? Barbara Bobelda & Judith 1-iavemann, "Child-Onli' Cases Rue on Wettare Rolls, WASH. Pos-T, Jan. 2, 1999. '"LN -NNE N1 CASPER & KENNETH R. BR}.SON, L.S. BURT -Au OF THE CENSUS, POPULATION DrnsloN WORKING PAPER NO. 26, -CO-RESIDENT" GRANDPARENTS AND THEIR GRANDCHILDREN'. GRANDPARENT -MAINTAINED FAMILIES (Mar- 1998). NOVEMBER -DECEMBER 1999 1 JOURNAL OF POVERT`, LAR' AND POLICY 02- 933 437 Earned Income Tax Credit New Funding for Low -Income Taxpayer Clinics In 1998 Congress authorized up to $6 million annually to support low-income taxpayer clinics (EITC). Such grants support two activities: (1) repre- sentation and/or referral of low-income taxpayers in controversies with the Internal Revenue Service (IRS) or with state revenue departments and (2) informing taxpayers for whom English is a second language about their rights and responsibilities (activities for such taxpayers include tax -preparation assistance). For the first year's funding in federal fiscal year 1999, Congress appropriated only $2 million. The IRS awarded 34 grants totaling $1.5 million. For the sec- ond year, Congress appropriated a full S6 million. The IRS issued a request for proposal in late October. with proposals due at the end of November. In addi- tion to renewal of funding for current LITCs, up to 40 new grants are likely to be issued for LITCs in January. Direct inquiries about local EITC programs to the taxpayer education coordinator of the IRS District Office or to the LITC Grant Program manager, 202.283.0181. students and 18-24 years old.Z7 A sub- stantial number of those full-time students live with a parent who has qualifying income for FITC. Often the young adult student, even though still living in the par- ent's home, is considered irrelevant to the parent's tax return because the young adult is working and going to school and may no longer be listed as a dependent. D. Disabled Adult Child A disabled adult, if living with a par- ent, grandparent, or foster parent, can be a qualifying child for EITC purposes. Nationally 3.6 million adults are receiving Supplemental Security Income based on a disability.28 Some 4.4 million disabled adults' are receiving social security, and many thousands of other disabled adults receive workers' compensation, railroad retirement, black lung, or veterans' bene- fits. 29 A not uncommon living arrange- ment for lower-income persons with severe disabilities is to stay at home with a parent. As many as one million disabled adults are likely to be qualifying children living with a parent who has qualifying income. V. IRS Compliance Initiatives FITC is unusual for antipoverty programs in that it is designed to be administered through the tax system. This approach results in lower adrnirllstrative costs and higher participation rates. However. EITC has been under attack because of high "noncompliance" by taxpayers who erro- neously. negligently, or fraudulently claim EITC benefits.30 A 1995 study by the IRS estimated that $4.3 billion in EITC pay- ments were made to taxpayers who were not eligible or were eligible and claimed an EITC benefit higher than the amount they were entitled to receive.31 In re- sponse to concerns expressed in Con- gress, the IRS has developed a major cam- paign to improve EITC compliance. Elements of that campaign include the following: ■ Some $716 million will be spent on EITC compliance over a five-year period beginning in 1998. ■ Some 1.3 million EITC returns will be screened each year. n U.S. Dep't of Educ.. Digest of Education Statistics ch. 3 (1997) <www.nces.ed.gov/pubs/ digest97/d970003.htm1>. 28 Social Sec. Admin., 61 Soc. SEC. BULL. IN. 2.A4 (1998). 29 GREEN BOOK, supra note 2, at 17. 30 ROBERT GREENSTEIN, CENTER ON BUDGET & POLICY PRIORITIES, THE EARNED INCOME TAX CREDIT AND ERROR RATES (Feb. 25, 1998). 31 U.S. GENERAL ACCOUNTING OFFICE, GAO/GGD-98-150, EARNED INCOME CREDIT: IRS TAX YEAR 1994 COMPuANCE STUDY AND RECENT EFFORTS To REDUCE NONCOMPLIANCE 9 (JUIy 1998). 438 CLEARINGHOUSE REVIEW I NOVEMBER—DECEMBER 1999 02- 933 Earned Incorne Tax Cmdu 2000 Earned Income Credit Outreach Campaign Each year the Center on Budget and Policy Priorities sponsors an Earned Income Credit Outreach Campaign that assists thousands of organizations around the country in helping low-wage workers obtain Earned Income Tax Credit benefits. The center's annual campaign kit contains outreach materials, including brochures, posters, flyers, and envelope stuffers in English and Spanish. Flyers in many other languages are available upon request. Fact sheets and other background information on earned income credit and an updated strategy guide suggest ideas to help local groups begin or expand an outreach campaign. The guide also informs about linking up with or starting volunteer income tax assistance projects. To get on the mailing list for the earned income credit campaign kits, call or write: Donna Cohen Ross (out- reach director) or John Wanchek (campaign coordinator), Center on Budget and Policy Priorities, 820 First St. NE, Suite 510, Washington, DC 20002; 202.408.1080; center®center.cbpp.org; www.cbpp.org. • Up to 400,000 taxpayers will receive notices regarding problems with social security numbers. ■ Up to 440,000 EITC returns each year will be audited.32 Inevitably, as a result of these ele- ments, the number of eligible persons who cannot negotiate this maze will increase. V1. Conclusion Prior research on EITC participation rates and the foregoing analysis of eligible fam- ilies at risk of losing benefits suggest that 32 Id. at 25-26. as many as four to six million families are eligible for but fail to receive FITC. At an average benefit of $1,500, this represents $6-9 billion lost to some of the most vul- nerable families. Further research is need- ed to document which groups are truly missing FITC benefits. Also, greater invest- ment in public education and outreach campaigns, volunteer tax -preparation pro- jects, and low-income taxpayer clinics will be necessary to close the gap between the number of families eligible for EITC and the number of those families who receive FITC benefits. NOVEMBER -DECEMBER 1999 1 IOURNAL OF POVERTY LAW AND POLICY 02- 933 4E39 Proposal to John S. and Jam .. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. Greater Miami Prosperity Campaign March 14, 2002 Overview The Human Services Coalition of Dade County (HSC) proposes to implement an innovative demonstration outreach program aimed at low-income working families of Miami -Dade County, designed to: educate them about the Earned Income Tax Credit (EITC) and related income support programs; support them to obtain the EITC and all other income support benefits for which they qualify; and connect them to financial literacy and asset development programs to enhance their long term economic status. Background Taxpayers must complete at least a portion of the EIC form in order to receive the EITC; as a result, not all eligible taxpayers receive it.I Until recently, it was commonly believed that approximately 80 percent of individuals eligible for the EITC receive it,2 but a new report by the Urban Institute reveals that a far smaller proportion of low-income families either know about the EITC or report ever having received it.3 The report, based on a survey of families, found that only approximately 2/3 of low-income parents (64.2 percent) had heard of the EITC, and that less than 1/2 of all low-income parents (43.2 percent) had ever received it.4 In addition, the study found that low-income Hispanic parents are less than half as likely to have heard of the EITC (only 32 percent had heard of the program) or to have ever received it (only 18.4 percent had received it),5 while non-English speaking Hispanic parents were only 1/4 as likely to have heard of the EITC (only 15.4 percent had heard of the program) and less than 1/10 as likely to have received it (only 3.9 percent had ever received it)6. The study also found that very low-income families (income less than 50 percent of the federal poverty level) and current recipients of welfare and food stamps were also less likely to have either heard about the EITC or to have received it.7 Based on these national data, it is apparent that at least 1/3 of the low-income families in Miami - Dade County have not heard of the EITC, and that fewer than 1/2 received it, while the proportion of uninformed low-income Hispanic parents is more than 2/3, and fewer than 1/5 received it. These data and the prevalence of poverty in Miami -Dade County make it imperative that steps be taken to inform low-income residents of the EITC, and to assist them in claiming it. ' J.K. Sholz, The Earned Income Tax Credit: Participation, Compliance, and Antipoverty Effectiveness, National Tax Journal 47(1): 63-87 (1994). 2 Taxes: EITC, Nannies, Migration News, Vol. 5, No. 9 (1998). 3 K. Ross Phillips, Who Knows about the Earned Income Tax Credit? New Federalism, Series B, No. B-27, The Urban Institute, Washington, D.C. January 2001. 4 Id., Fig. 1, p. 4. 5 Id. 6 Id., Table 3, p. 5. Tax filers who appear eligible, but do not claim the EITC, receive a letter from the IRS notifying them of its availability. However, the letter is written in English only. Id., p. 5, and note 6. ' Id., Table 1, p. 2. 02- 933 Proposal to John S. and Jam _. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. A report by The Brookings Institution on the impact of the EITC in greater Miami,s indicates that 27.2 % of Miami -Dade County taxpayers (247,006 taxpayers) received EITC refunds in 1998 which totaled to $393.1 million.9 Based on the Urban Institute's report,10 it is safe to assume that only 1/2 of the eligible taxpayers in Miami -Dade County have ever received the EITC. i 1 Therefore, it is reasonable to assume that an additional 250,000 taxpayers in Miami - Dade County are eligible for and could claim the EITC. For these 250,000 low-income working families in Miami -Dade County, the struggle to make ends meet is harder than it has to be, due in part to lack of knowledge of this important federal tax credit. Informing them about the EITC benefit is one of the most important, efficient and least expensive ways to help these low-income working families earn enough to support their families without reliance on public or private charity. Additionally, the EITC is now more important than ever because so many families have made the transition from welfare to the workplace, while losing eligibility for income supports such as Medicaid and food stamps. Even taxpayers who do file for the EITC unfortunately often lose a substantial portion of their refundable credit in fees and interest by paying a commercial tax preparer to fill out their forms and by choosing to obtain an advance. Better alternatives exist through the Volunteer Income Tax Assistance (VITA) service, and other free or volunteer programs. The VITA sites are IRS - sponsored programs that place trained volunteers in churches, libraries, shopping malls, community colleges, and other public sites from late January through April 15 to answer questions and help fill out tax forms. Other free tax preparation services exist in many communities, with several demonstrating great success (e.g. Tulsa and Chicago). However, no such additional free services are offered in Miami -Dade County. Project Description The Greater Miami Prosperity Campaign will: (1) increase the revenue of low-income families and individuals in Miami -Dade County through increased participation in the EITC; (2) increase the flow of federal tax dollars into low-income communities in Miami -Dade County and thereby increase the county's prosperity; (3) increase the number of low-income families and individuals receiving benefits from other income support programs such as KidCare, Medicaid, and Food Stamps; (4) increase the financial literacy of low-income families and individuals; and (5) increase the number and value of assets accumulated by low-income families that can be used for sustainable poverty reduction strategies such as home and car purchase and enrollment in education programs. The Campaign will target low-income communities, immigrants who may fear participation or be unaware of the EITC and other programs due to language barriers, women heads of 8 Center on Urban & Metropolitan Policy, Rewarding Work: The Impact of the Earned Income Tax Credit in Greater Miami, EITC Series, The Brookings Institution, Washington, D.C., June 2001. 9 Id., Appendix B, C, pp. 7-8. to K. Ross Phillips, January 2001, op cit. " The proportion of eligible taxpayers not receiving the EITC is probably greater than one half because of the large Hispanic population in Miami -Dade County and the large number of very low-income taxpayers. 2 ®2- 933 Proposal to John S. and Jam _. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. households, and workers without children who may be eligible for a smaller credit. If all of the eligible taxpayers in Miami -Dade County were to receive the EITC, it can be roughly estimated that the federal tax refund infusion into the local economy would be twice the amount as is now being claimed, or an additional $393.1 million per year. The Greater Miami Prosperity Campaign has five components: 1. Coordination of current and planned EITC outreach, tax preparation and asset development activities. 2. Coordination of a marketing campaign regarding EITC and related income support programs. 3. Establishment of five Prosperity Centers in strategic areas of high need in Miami -Dade County. 4. Establishment of a comprehensive financial literacy and asset development program for low-income Miami -Dade residents. 5. Development of ongoing evaluation, monitoring and replication tools and program components to support the expansion of the Prosperity Campaign to other communities. Coordination of current and planned efforts: HSC will commence the project by identifying diverse local leaders to spearhead the unified education, enrollment, and asset development campaign across the many sectors of our community. This work has already begun with interest expressed by groups such as the Miami Metro Action Plan (MMAP), Greater Miami Chamber of Commerce (GMCC), South Florida Workforce, YWCA, IRS, Department of Children and Families, Western Union, Mayor Alex Penelas and Mayor Manny Diaz. HSC will engage all stakeholders in the development of a masterplan and resource directory for the campaign, dividing up responsibilities according to assets, expertise and natural constituencies. A Prosperity Task Force will serve as the oversight body for the campaign, assigning responsibilities and team and neighborhood leadership, monitoring progress, marketing the campaign, and showcasing successes. Marketing campaign: The campaign will develop a logo, slogan, website, toll-free number, and easy to understand trilingual educational, resource and marketing materials, drawing upon effective materials designed by such groups as the Center for Budget and Policy Priorities and the National 3 02- 933 Proposal to John S. and Jam .. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. Conference of Mayors. Distribution will be linked to other related campaigns (e.g. KidCare and Food Stamps enrollment, job training, health outreach), and will occur in the sites most likely to attract and encourage participation (e.g. workplaces, houses of worship, public transit, vocational rehabilitation programs, hospitals and clinics). The campaign will seek free and low cost media support, utilizing bus ads, bus benches, newsprint and radio, and television public service announcements. Target audiences include eligible families and individuals, but also their employers, civic and faith leaders, and others coming into direct contact with those who are potentially eligible for tax credits and other income support programs. Thus, business related outreach is a key component of this campaign so that employers can become more familiar with the programs and support their workers to apply for and obtain benefits. Campaign sponsorship opportunities will be provided to businesses prepared to market the campaign with the common logos and slogans (e.g. Western Union has expressed interest), and to civic leaders prepared to promote the campaign in their public appearances. Establishment of five Prosperity Centers: There are no comprehensive enrollment sites currently available in Miami -Dade that promote and support the full range of income support and asset development opportunities available to low-income residents. The campaign will therefore seek to establish five prototype Prosperity Centers in partnership with organizations that can provide easy access to large numbers of the target population (e.g. One Stop employment centers, Department of Children and Families, health clinics, schools, other government offices or community centers) in areas of greatest need currently underserved by free tax preparation and other enrollment programs. HSC will recruit and train volunteers and interns to staff these centers in coordination with project staff. HSC will draw upon the experience of cities that have launched successful campaigns such as Tulsa and Chicago to replicate best practices in center design and service delivery. Services will include tax preparation assistance, electronic filing, amended filing (up to three years), assistance with related income support applications, referral to other related support programs and enrollment in peer support groups (e.g. home purchase, business development, etc.). Establishment of financial literacy and asset development program: This financial literacy component of the Prosperity Campaign will provide individual counseling and group training around financial literacy concepts and practices such as use of banks, avoidance of predatory lending and check cashing fees, and saving to achieve long-term goals. HSC will draw upon best practices and materials (e.g. American Express Economic Independence Fund curricula 12) to create a comprehensive resource library on financial literacy 12 HSC is submitting a separate proposal to American Express to utilize these materials for this campaign. 4 02- 933 Proposal to John S. and Jam _. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. and asset development. HSC will launch the Real Benefits 13 virtual public benefits calculator which will identify all income support programs for which individuals are eligible, and the customized Florida "Self Sufficiency Standard'" as a tool to assist individuals and families to realistically assess their financial situation and make long-range career plans that will help them to realize their financial goals. HSC will utilize its extensive community network to promote this and all aspects of the campaign, working through employers (including through the new "roving HR director" concept HSC hopes to launch by summer 2002 to service the small business community that may have no or limited human resource staff). Other key partner networks include the faith coalitions, financial institutions, hospitals and clinics, schools and public agencies. The asset development component of the Prosperity Campaign will enlist banks and other financial institutions and seek matching funds from them to encourage low-income workers to save a portion of their EITC and earnings. The Campaign will establish criteria for taxpayer participation and recruit low income families and individuals to participate in financial literacy and asset development activities. Ongoing peer and mentoring support for the participants is a necessary component of program success. HSC will draw upon proven methods learned from its model welfare to work program, Families in Touch, which demonstrated that job retention and advancement are inextricably linked to peer and community support. Evaluation and replication: The Greater Miami Prosperity Campaign will develop a consensus comprehensive work plan at the outset, to ensure that all stakeholders have a common understanding of campaign goals and tasks. Tracking tools and database management will be critical campaign components, allowing ongoing evaluation, midstream corrections, and active engagement of campaign participants and the community throughout the process. From the outset, this campaign will be designed with the intention of replication of successful components both in Miami -Dade and in other communities, thus all activities will be carefully documented and assessed. A key component of the initial planning will be the establishment of agreed to measures of success, including numbers of people requesting information, completing applications, receiving public benefits, and increasing their economic standing. In addition, process and subjective outcomes such as level of participation by the community and sense of increased family security will be measured. Follow up contacts with individuals who received one-on-one assistance will be made to determine success and income growth. Progress reports will be provided to all partners, with regular reporting to the media and public officials as well. 13 HSC has partnered with Community Catalyst in Boston to develop and launch the Food Stamps component of this tool, now in use throughout Miami -Dade and streamlining the application process. Health benefits and income support programs will be the next features to be added to this one stop relational eligibility calculator. 14 HSC was selected as the Florida lead for development of the Self Sufficiency Standard in conjunction with Wider Opportunities for Women and the University of Washington. This standard is used to determine income adequacy by family type and region within the state, and to set program and policy benchmarks related to income adequacy. 5 02- 933 Proposal to John S. and Jam .. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. Corporate sponsorship and governmental ownership will be key strategies for program replication and sustainability. Thus campaign leadership opportunities will be created for potential future campaign leaders from the project outset. The Campaign Task Force will also be selected with longevity in mind, anticipating campaign ownership beyond the terms of this grant. Human Services Coalition organizational capacity: HSC was founded in 1996 as an outgrowth of the League of Women Voters' Social Policy Committee. The mission at that time was a sustained effort around welfare reform and social service planning. Six years later, under founder and Executive Director Daniella Levine, J.D., M.S.W., HSC has become the premier local umbrella organization promoting civic involvement in a range of community concerns, including economic justice and access to vital health and human services. HSC's mission today is to empower and build the leadership of individuals and communities, to create a more just and equitable society by promoting civic engagement, economic fairness, and access to health and economic services that address unmet needs. Organizational strategies include: coalition building, capacity building (developing and disseminating information and tools to empower individuals and communities to achieve shared goals) and innovation. HSC is committed to making a difference in the lives of underserved, disempowered, and vulnerable peoples and communities throughout Miami -Dade and beyond. HSC has launched a number of innovative projects that assure the necessary breadth, skill and credibility needed to tackle a project of this significance. Several relevant HSC programs are described below: ■ The Community Leadership Institute each year trains 200 individuals on leadership and civic processes and is currently supported by the Knight Foundation for expansion to the Overtown community. HSC is the community leader in public benefits outreach to low-income families (including immigrant, minority, and refugee communities) regarding Florida's low cost health insurance program, Florida KidCare, Medicaid and Food Stamps (thanks to receipt of one of 12 national demonstration grants from the USDA). These initiatives use a creative, community-based model in which HSC has partnered with over 30 community- based organizations to disseminate information to uninsured and underserved families in Miami -Dade County. Through this effort enrollment of Miami -Dade County children in the KidCare program has increased by more than 94,000. ■ HSC developed Families in Touch, a successful welfare -to -work pilot program, that has been demonstrated a national leader in job retention and career advancement strategies. ■ HSC is a clearinghouse of information through the weekly newsletter, CHAIN Reaction, which reaches over 6000 organizations and individuals throughout Florida. ■ HSC is the primary organizer of an annual trip to the State Capitol for public education and advocacy purposes. In February approximately 70 people took a 10 -hour bus trip for a 3 -day activity, CHAIN Days, in which people with disabilities, immigrants struggling ON 02- 933 Proposal to John S. and Jam.. .. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. to survive and other disenfranchised people spoke effectively to legislators on a range of issues relevant to their lives. HSC founded and developed the Union of the Uninsured, a) seeking to improve customer service and respect at public health clinics, b) working in a pilot program with public and private providers to expand free health care through the Public Health Trust's pilot Trust Care program, and c) collaborating with Brandeis University in studying medical debt. ■ HSC helped launch and supports the Cross -Disabilities Transportation Issues Committee, an advocacy group for those using para -transit vehicles in Miami -Dade County. The People's Portal website and training program addresses the digital divide by organizing information about public benefits and other programs on the web, and then linking people to these resources through local technology centers, placement of refurbished computers in the community, and extensive training of individuals and businesses. HSC organized the Technology Access Center (TAC) Coalition to bring together and coordinate area programs working on bridging the digital divide. Timetable This 18 -month project will commence in the summer of 2002 and end post tax season in the winter of 2003, covering 2002 tax year filings and preparations for the 2003 tax year filings. This timing allows HSC to enlist Prosperity Campaign members, map out the campaign strategy and players, develop necessary materials and media, line up volunteer staff and sites and train the volunteers to provide tax assistance services, design the financial literacy and asset development programs, and enlist support from financial institutions, prior to the launch of the campaign in late 2002. The EITC outreach campaign will be launched in late 2002, well in advance of the beginning of the tax- filing season in late January 2003. Assistance at the five Prosperity Centers will be provided during the 2002 tax -filing season, from late January to late April 2003, and will include preparation of current year returns as well as amended returns for past years in which the EITC was not claimed, financial literacy training and recruitment for the asset development program, and assistance with applications for other income support programs. Post April 15, amended filings and other related services will continue, along with financial literacy training and participation in the asset development program, evaluation of the Prosperity Campaign, documentation and preparation for multi -site replication, and preparations for the 2003 tax year. Budget HSC seeks funding for a full time project coordinator, a 2/5 time project director, and two tax assistance coordinators who will work full time during a six month period covering the tax filing season, along with a part time marketing consultant, as the Prosperity Campaign core staffing. 02 933 Proposal to John S. and Jamk .. Knight Foundation Submitted by the Human Services Coalition of Dade County, Inc. Additional funds are needed for meetings, media, material development and production, office expenses and administrative overhead. Travel expenses to visit model sites and invite future replication sites to Miami will be needed. The total estimated project budget for an 18 -month period is $235,000.00, a sum that is approximately 51100 of one percent of the annual potential benefit to the community of almost $400 million. A detailed budget is attached. 02- 933