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Addressing the Goals of Economically Self-Sufficient Families With the help of the Annie E. Casey Foundation, Baker, Greene, and Warren counties conducted an initiative for their county’s working families living in poverty, or living close to the poverty line. This initiative focused on four activities: 1. Providing outreach and education about the benefits of the Earned Income Tax Credit (EITC); 2. Preserving the value of the EITC by providing and supporting free tax filing assistance; 3. Developing activities focused on assisting individuals in building personal assets. These activities include linking working individuals and families with financial institutions, providing training in financial literacy, assisting individuals with setting financial goals for education and training, and moving individuals towards home ownership; and 4. Stimulating the local economy with the strengthened purchasing and saving power of families and individuals benefiting from the EITC. All, or portions, of this initiative are suitable for rural counties interested in addressing the result area of “Self-Sufficient Families. Although the entire community can benefit from one or more activities in this initiative, the largest gains can be made by reaching out to working families at or near the poverty line. The first target group that may come to mind for many counties are those families involved in the Family Connection Targeted Case Management Program for Medicaid-eligible children at risk. But it is important to note that many workers who provide services for this population might also be eligible for this federal tax credit. Many individuals work full time at jobs that provide a relatively low level of income. A recent sample by the Brookings Institution Center on Urban and Metropolitan Policy indicated that Georgia workers in the following job categories are often eligible for the Earned Income Tax Credit: Bakers Receptionists Cooks School bus drivers Dental assistants Security guards Janitors Social workers Pre-school teachers Travel agents The EITC — what is it? Individuals who work — especially those who work year long — should not have to live below the poverty level. The Earned Income Tax Credit, enacted by Congress in 1975, is a special tax benefit for working people who earn low to moderate wages. Workers who qualify for this benefit, and file a federal tax return, can get back some or all of the federal income tax that was taken out of their pay during the year. And, they may also receive extra cash back from the Internal Revenue Service (IRS). The EITC has several important benefits: It reduces taxes for these workers, It supplements wages by reducing income inequality, It makes work more attractive than welfare, and It helps low income families build assets. The EITC has a direct impact in terms of reducing poverty. In 1999, nationally, the EITC lifted 4.7 million people out of poverty, including 2.5 million children— more than any other federal aid program. (Brookings, 2001a) Who benefits from the EITC? According to the U.S. Department of Treasury, those who benefit are: Working families with children. Children are more likely to be poor than Americans of any other age group. The largest EITC benefit is for working families with two or more children. Low-income workers, even if they do not have a qualifying child. This credit provides a financial boost to people who work at very low wages or are only able to find part-time work. State and local economies. EITC participation boosts state and local economies. In the first eight months of 2001 alone, nearly $31 billion in federal EITC funds flowed into the states. Since most EITC benefits are spent locally, the EITC is an economic development tool for low income neighborhoods. By increasing the income of low-wage earners, the EITC can reduce the demand for some public services and benefit programs provided by state and local governments (IRS). Can the EITC impact my county? Yes. The data for the state makes a convincing argument for the positive role EITC can play. In the late1990s in Georgia “the average before-tax income of a family in the bottom fifth of the income distribution was around $11,500. Adjusted for inflation, these families were actually earning 6 percent less than they were during the late 1970s” (Brookings 2001a). The Georgia Rural Development Council, in its January 2000 report The State of Rural Georgia: ‘Surviving, not Thriving’ noted that only 50 of Georgia’s counties were either developing or rapidly developing. Of the rural counties, approximately 50 are categorized as either lagging or declining. In terms of dollars, the federal Earned Income Tax Credit delivered over $30 billion to 18.4 million low income families across the U.S. in the 2001 tax year (Brookings, 2001b). In studies cited by the Brookings Institution, “between 1993 and 1999, the number of families receiving the EITC increased by 29 percent. The number of people lifted out of poverty by the EITC increased by 124% over the same time period. And, you do not have to serve large numbers of individuals to make a difference at a county level. Baker County, with a population of 4,074, provided free tax preparation services to 50 individuals and brought a total of $44,018 dollars back into their county. Of this amount, $25,747 went to EITC recipients. Warren County, with a population of 6,336, served 52 individuals and brought in $66.780 in federal refunds, of which $37,243 went to EITC recipients. And those EITC filers were all saved the cost of tax preparation, putting approximately an extra $100 or more back into the pockets of low-income, working, families. And because they filed electronically, they received their tax refunds as quickly as if they had used a paid preparer. And unlike many windfalls people may receive, most of these dollars are spent in the recipient’s community. What services does the EITC provide? Free Tax Preparation. Offering free tax preparation services for low to moderate income residents is both rewarding and challenging. Time is of the essence for organizing and implementing this activity in time for the next tax season. Plans for the site must be solid enough by October to be assigned an Electronic Filer Identification Number in order to transmit the returns electronically. Potential workers need to receive training during November or December in order to be ready for filing in January. Publicity for the site needs to be done in December (or earlier) to ensure individuals eligible for the EITC, and who normally visit paid preparers, take advantage of your site. Financial Literacy. Financial literacy is assisting people of all ages to become knowledgeable about the many facets of money management — from understanding the deductions in their pay check, to the importance of developing a good credit history, to planning for future purchases, such as a home. Wachovia Bank, which has a representative on the Family Connection Partnership board, and United States Department of Agriculture Rural Development can both provide assistance to counties with this effort. Both are providers of the Federal Deposit Insurance Corporation’s (FDIC) Money Smart financial literacy curriculum. In fact, the USDA Rural Development has recently been given a mandate to deliver the FDIC curriculum in rural areas and is actively seeking partners in this work. In addition to these partners, the Georgia Cooperative Extension Service, which is represented on many local collaborative boards, has its own financial literacy curriculum called Gateway. Greene County used materials from both the FDIC and the Cooperative Extension Service in their recent classes. In addition, Greene County also made use of local resources to address retirement, bankruptcy, and payroll deductions. Personal Asset Building. The most important single asset an individual may acquire during their lifetime is a house. But there are other types of assets workers may aspire to, as well. Increased educational attainment is one, and improved personal transportation could be another. Where can I find additional information about the EITC? For additional information about the EITC please contact Diane Cousineau. She can be reached at firstname.lastname@example.org, or at 423-596-0978. Data Sources Alan Berube and Benjamin Forman. (2001a). Rewarding Work: The Impact of the Earned Income Tax Credit in Greater Columbus, GA. Washington, D.C.: Brookings Institution Center on Urban and Metropolitan Policy. See also other Georgia cities in this series. Alan Berube and Benjamin Forman. (2001b). A Local Ladder for the Working Poor: The Impact of the Earned Income Tax Credit in U.S. Metropolitan Areas. Washington, D.C.: Brookings Institution Center on Urban and Metropolitan Policy. Georgia Rural Development Council Technical Advisory Committee. (2000). The State of Rural Georgia: ‘Surviving, not Thriving.’ Atlanta: Georgia Rural Development Council.
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