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Unclaimed Melody: 1 in 4 Southern tax filers claimed the EITC in 2010; more than $2.9 billion still unclaimed

Unclaimed Melody: 1 in 4 Southern tax filers claimed the EITC in 2010; more than $2.9 billion still unclaimed

The federal Earned Income Tax Credit (EITC) is keeping people out of poverty. In the South from 2009 to 2011, 2.2 million people – 52 percent of them children – received enough support from the EITC to remain above the poverty line. It’s helping keep rural people out of poverty, too. The Center on Budget and Policy Priorities revealed that nearly 23 percent of rural tax filers (compared to 20 percent nationwide) claimed the EITC in 2010, drawing down more than $10.5 billion to meet the immediate needs of low-income working families. The figures are even more striking for the South: 30 percent of rural tax filers claimed the EITC compared to 24 percent of urban tax filers.(1) This and other findings emerge from fresh analyses of government data, especially the Supplemental Poverty Measure.

The EITC is one of the few federal programs that have received bi-partisan support since its initial passage. Signed into law under President Ford, and expanded by Presidents Reagan, Clinton, Bush, and Obama, the EITC has had a significant impact on reducing poverty. In fact, President Reagan referred to the EITC as “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”(2)

Impact in the South

The economic impact of the EITC is particularly significant in the non-metro South. While accounting for only 40 percent of America’s total non-metro population, Southern EITC tax filers (2 million) claimed nearly 50 percent ($5 billion of the $10.5 in rural America) of the total credits with an average return of $2,442.(3)

And thanks to the Census office’s new Supplemental Poverty Measure, we are able to see how the EITC is actually keeping people out of poverty. According to an analysis by the The Brookings Institution, from 2009 to 2011, 2.2 million Southerners were kept out of poverty by the EITC alone. The table below shows, state-by-state, how families and children were affected by EITC uptake. The map that follows displays the percent of total tax returns claiming the EITC by county.

(Click to view larger images.)

Unclaimed EITC in the South

Though EITC uptake has increased during the economic downturn, far too many eligible people fail to claim the EITC. In 2010, nearly 1.9 million eligible Southerners failed to claim the EITC, leaving more than $2.9 billion on the table. This money could have been spent in local economies, boosting economic activity and providing a much needed economic boost to families.

(Click to view larger image.)

North Carolina

Until March, North Carolina was the only Southern state to offer a state version of the EITC. Eligible tax payers were able to receive 5 percent of the federal EITC through 2012, 4.5 percent in 2013. The credit was eliminated by a new law, passed this spring. With the elimination of the state EITC, state legislators have removed a critical supplement for low-income families, particularly veterans. According to recent analysis completed by the Center on Budget and Policy Priorities, roughly 64,000 veteran and active-duty military families will be affected by the expiration of the state’s EITC.

The Benefit Bank® of North Carolina

But the federal tax credit still exists and there are ways to reach out to eligible individuals. In our neck of the woods, The Benefit Bank of North Carolina is one way. TBB-NC is a statewide initiative that connects low- and medium-income families and individuals to work and education supports, including tax credits, food and health benefits, and student financial aid. TBB-NC supports participating organizations with free counselor training and access to The Benefit Bank, a powerful online service that makes it easy for eligible individuals to complete their state and federal tax returns in order claim the EITC. (Individuals can also complete their taxes using the self-serve version of TBB). With nearly 160,000 North Carolinians failing to claim the EITC in 2010, more than $245 million is waiting to be claimed. To learn more about our efforts visit the TBB-NC website.

 


1) Author’s calculations of Brookings Institution data. 2013 Rural-Urban Continuum Codes. United States Department of Agriculture.

2) Chicago Tribute, October 23, 1986.

3) Author’s calculations of Brookings Institution data and USDA metro classifications