TargetingTax Credit

Outreach

Tax Credit Train-the-Trainer SeminarCenter on Budget and Policy Priorities

Steve Holt, HoltSolutionsSeptember 24, 2013

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Three Outreach Goals

1)Battling the high cost of getting a refund

2)Maximizing take-up of the EITC

3)Facilitating universal health insurance coverage

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High Cost of Getting a Refund

• Return preparation & filingo Average: around $200o As high as $500 or more (per mystery shoppers)o Lack of transparency

• Add-Onso Application, document, processing, etc. feeso A few dollars to a few hundred dollarso Again, lack of transparency

• Products: predatory prepaid cardso Fees to use & fees not to useo Required use for receipt of some state tax refunds

• Products: sales financing• Products: RACs

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Refund Anticipation Checks (RAC)

• One-time bank account for receipt of refund & issuance of check

• No faster than direct deposit

• BUT provide way to pay for return preparation without upfront cash

• SO a high-cost, short-term preparation fee loan

• ~$30 each, but $438M total in 2010

• Now the default commercial product

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Share of All Tax Filers Using Paid Preparers

Series1

70.1%

59.6%53.9%

46.6%

36.0%

54.8%

Los Angeles CA Fresno CA Pueblo COFlagler FL Leon FL NATIONAL

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Use of Paid Preparers – All Filers vs. EITC Filers

Lane OR Worcester MA Los Angeles CA

Leon FL NATIONAL0%

25%

50%

75%

100%

% All Filers Using Paid % EITC Filers Users Paid

.861.01

1.08 1.311.07

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Getting Your Refund – The Outreach Message

• Returns prepared free at VITA sites

• Self-preparation alternatives

• Direct deposit (including split refunds)

• Be a smart consumero Shop around

oAsk questions

o Insist on responsible behavior9/24/13

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Maximizing EITC Take-Up: Tools

1) Understanding the EITC population

2) Participation rates & who’s not claiming

3) Outreach focus & targeting

4) Data & benchmarking

5) Setting incremental campaign targets

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Basic EITC Statistics

Tax Year 2010 (2011 filing season):

• 19.2% of all individual income tax filerso 27.4 million EITC households claiming $59.6 billion

• 91% of EITC amount paid as refunds

• 26% of EITC returns include some self-employment income (average amount: $6,800)

Tax Year 2011 (2012 filing season - preliminary):

• 19.5% of filers (28.3 million households)

• $64.4 billion total credits

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EITC Variability – # of Qualifying

Children# of

Qualifying Children

% ofAll

Claims

% ofAmountClaimed

0 24% 3%

1 37% 36%

2 27% 41%

3+ 12% 20%

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EITC Population – It’s a Shifting Target

Dowd & Horowitz “Short-Term Safety Net or Long-Term Income

Support” (looking at 1989 to 2006)

• Almost 50% of taxpayers with a child claimed EITC at least once

• & another study indicates this was probably an undercount

• 42% claimed only 1 year

• 37% claimed 6+ years• this group had little income mobility

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EITC Population – It’s a Shifting Target

(cont.)Ackerman, Holtzblatt & Masken

(looking at 57M individuals receiving EITC 2000-2006)

o Average # of years claimed: 3.2o 30% claimed in only 1 of the 7 yearso 11% claimed all 7 yearso 15% claimed for 4 to 6 years

Local area population variations:

o In- and out-migrationo Economic shifts

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EITC Participation or Claim Rates

“only 75% of eligible families inLincoln County are getting their EITC”

• Very hard to determineo Biggest problem: limited data on non-filerso Plus: available data unreliable at local level

• Best estimates?o At least 75% (Plueger & O’Hara TY2005 study)o Maybe 85% +o Very high for EITC-eligible who file a returno Rate probably varies some by locality & population

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EITC TY2005 Study – Who Is Eligible But Not Claiming?

• 2 out of 3 non-claimants didn’t file a tax return (& majority weren’t required to)

• Claim rate increases with size of credito If <$500 EITC, <70% claim rate

o If $2,300+ EITC, at least 85% claim rate

• Claim rate increases with # of qualifying childreno at least: 56% if 0 QC / 74% if 1 / 86% if 2+

• Lower claim rate in states without income tax ?

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EITC Outreach – Keeping the Right Focus

• Dual objectiveso General awareness (community networks

perspective)o Specific populations who may have less awareness

• Be wary with “money left on the table” argumentso Speculativeo Tendency to be misleading

• Value of incremental targetso % increase in baseline of EITC filerso Restrained estimates of additional dollars to

communityo Underscore variability in population

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EITC Benchmarking & Targeting – Using Brookings EITC Website

www.brookings.edu/research/interactives/eitc

o Two categories: 1) All tax filers, 2) EITC filers

o Based on Zip Code-level data

o “Smart” assignment of data to counties, cities, metro areas, electoral districts, etc.

o Multiple variables

o Tax Year 2011 at main link now

o Prior Tax Years (to 1997) available via old interface 9/24/13

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Tax Credit Benchmarking• Using Brookings EITC website:

o Compare local data to national or other area data

o Compare data within the local area

• Incorporate other data sources, e.g.:o Brookings EITC Profiles

o www.census.gov

o Local IRS SPEC

o Universities & civic research organizations

o (perhaps most importantly) “street sense”

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Benchmarking (Local/National)–

Average EITC Claimed

Series1

$2,662$2,423

$2,233$1,990

$1,730

$2,301

Tulare CA Pulaski AR El Paso CO

Worcester MA Addison VT NATIONAL

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Benchmarking (Local/National)–

% of Tax Filers Claiming EITC

Series1

41.7%

31.0%

22.2%17.9%

11.5%

20.0%

Chicot AR Fresno CA Volusia FLSan Diego CA Kent RI NATIONAL

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Benchmarking (Local/National)–

Average Add’l CTC (ACTC) Claimed

Series1

$1,410 $1,395 $1,292 $1,257 $1,199$1,340

El Paso CO Tehama CA Osceola FLLane OR Chicot AR NATIONAL

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Benchmarking (Local/National)–

% of Tax Filers Claiming ACTC

Series1

36.2%

23.1%

17.0%12.0%

6.7%

15.0%

Tulare CA Riverside CA Pima AZ Leon FLKent RI NATIONAL

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Benchmarking Tool – A Proxy for Participation Rates• Brookings website data includes AGI groupings

o # of taxpayers in $5,000 increments

• $0 - $5,000, $5,000 - $10,000, etc.

o Can use to show size of low-income filing population

• Determine filing % below $30,000 (low-income)

• Compare to % claiming EITC

• Calculate ratio of EITC % to low-income %

• Use for possible insights into participation

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Benchmarking (Local/National) –

Relationship to Low-Income

Sonoma CA Multnomah OR

Pueblo CO Chicot AR NATIONAL0%

20%

40%

60%

80%

% Filers < $30,000 % Filers with EITC

.29 .36.48 .65

.42

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Benchmarking (Local/Local) –

Relationship to Low-Income

Oro Valley Tucson Ajo S. Tucson Sells0%

20%

40%

60%

80%

% Filers < $30,000 % Filers with EITC

.21.47 .51

.83Pima County, AZ

.61

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EITC – Examples of Calculating Incremental Campaign Targets

County (with EITC to Low Inc

ratio) 

(A)Baseline

# of Filers

(B)Baseline Avg EITC Payment

(C)Increas

e Target

(D)New Filers(A * C)

NewPayments(50% of B

* D)

KentRI (.28) 9,323 $1,789 10.0% 932 $833,674

FlaglerFL (.39) 8,588 $2,248 7.5% 644 $723,856

PulaskiAR (.49) 40,991 $2,423 5.0% 2,050 $2,483,575

TulareCA (.59) 52,941 $2,662 2.5% 1,324 $1,762,244

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Health Insurance Coverage –the Affordable Care Act

(ACA)• Employer coverage

• Medicaid / CHIPo Expansion states

o Non-expansion states

• Marketplaces (state-by-state)o State-run

o Federally-facilitated

o Federal/state partnership

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Key Considerations for ACA Categories of Coverage

• Employer coverageo Adequate

o Affordable

• Medicaido 133% (138%) of federal poverty line (FPL)

o Patchwork eligibility in non-expansion states

• Marketplaceso Premium Tax Credit (100% to 400% of FPL)

o Cost-sharing subsidies

o Bronze, Silver, Gold, Platinum insurance plans9/24/13

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Tax Credit Outreach – ACA/EITC Population Overlaps

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ACA Implementation Resources• Navigators / In-Person Assistors

• Certified Application Counselors

• Marketplaceso www.healthcare.gov

o State exchange websites

• Community tax siteso Making projections for Premium Tax Credit

advances

o Facilitating information updating

o Reconciling Premium Tax Credit (2015 tax season)

o Determining penalties (2015 tax season)9/24/13

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Targeting Tax Credit Outreach

Contact information:

Steve HoltHoltSolutions3415 North 55th StreetMilwaukee, WI 53216(414) 467-6899holtsolutions@earthlink.net

9/24/13