Earned Income Tax Credit (EITC) can provide a one year refund up to $5,666. EITC returns millions to our Olmsted County community. A sustained EITC initiative can be the single most powerful initiative for financial stability within a community.
Child Tax Credit (CTC) is a refundable tax credit. An additional federal tax credit worth up to $1,000 for each child under the age of 17 claimed as a dependent on the worker’s tax return. This is provided to parents, grandparents, foster parents, and others providing resident child care.
Working Family Credit (WFC) is a Minnesota version of the EITC. Minnesota, as well as 22 other states, offers a state version of the EITC. Like the federal credit, it is fully refundable. In 1998 the legislature restructured Minnesota’s credit so that it equals a percentage of earned income, rather than a percentage of the federal credit.
Lost revenue for families and our community
Information from the Internal Revenue Service, Brookings Institute, and Center on Budget and Policy Priorities indicate only 75%-85% of active eligible tax filers participate in the Earned Income Tax Credit. Figuratively speaking, 15%-25% of eligible Earned Income Tax Credit participants do not claim the refundable benefit!
In Olmsted County, this 15%-25% of eligible EITC participants that do not claim their refund equates to 1,000 -1,700 individuals. The average EITC/CTC/WFC return in 2006 was $1,711. In Olmsted County, we have an additional 4,050 individuals that use a paid tax preparer. According to Accountability Minnesota, the average cost for paid tax preparation is $120.
According to Children's Defense Fund, increasing the number of EITC returns would be highly beneficial to local communities. For each additional dollar received, it generates roughly $1.58 in local econonmic activity. According to 2006 IRS data and the average EITC refund in this county, this is between $1,741,798 - $2,900,567 in lost income to lower-wage working families and lost local economic activity.