Long-standing tax credit under-utilized by families

It will take time for the federal stimulus money to reach our communities and kick-start the nation’s economy. But for many working families, there’s already a more personal stimulus package that’s available and waiting, yet often overlooked during tax season.

It’s called the Earned Income Tax Credit and since its creation in 1975, it has put about $43 billion back into the households of more than 22 million low-wage workers nationwide. Created to shield low-wage workers from raising payroll taxes, it since has been expanded under Democratic and Republican administrations, and can return up to $4,800 to working families with children, depending on income and family size.

Why is this important? The EITC annually lifts 4.5 million people above the poverty line — and half of them are children. Economic data also show that every increased dollar received by low- and moderate-income families has a multiplier effect of between 1.5 to two times in terms of its impact on the local community.

Unfortunately, many who are eligible for EITC either don’t know about it or don’t apply for it. About 15 percent to 20 percent of eligible people fail to claim the EITC, one study showed. Equally disturbing is the fact that about 70 percent of EITC recipients pay to have their taxes prepared — often for considerable amounts. About 35 percent also pay for a rapid refund loan in addition to the amount paid for completing and filing the return. These costs eat away at the true economic power of the EITC.

As a member of the Atlanta Prosperity Campaign, we are working with other metro Atlanta nonprofits to ensure that more families in need get the EITC, and get it at the lowest cost possible — free. Last year, the Center for Working Families helped more than 1,200 people file their taxes for free and get the EITC they were due, returning money to the community.

This year, we have already helped more than 500 people file this tax season. We have also teamed with the Atlanta City Employees Credit Union to help unbanked filers open saving accounts. This helps filers keep more money in their pocket to pay their mortgage, get needed medical attention or put food on the table.

We also link families to other public benefits like food stamps and utility assistance that can help close the gap between earnings and what is needed to support a family. Public benefits can play a big role in keeping families out of poverty, particularly in tough times.

Last year, EITC helped Atlanta families receive about $11 million. Nevertheless, 20 percent of eligible Atlanta families did not file.

This year, we need to make sure we reduce that number — for our economy and our city, and for the hard-working families with children who deserve our help.

• David A. Jackson is president and CEO of the Center for Working Families.