California taxpayers are leaving more than $1.2 billion in tax refunds on the table, money that could be used to give working class residents a financial lifeline and give a needed economic stimulus to the state's economy, according to a new report released by the New America Foundation.
At issue is the Earned Income Tax Credit (EITC), which provides refunds of up to $5,028 for a family of four.
More than 800,000 Californians will miss out on it this year, say researchers, simply because they haven't applied for it.
"The Earned Income Tax Credit is the biggest antipoverty tool you've never heard of," said Anne Stuhldreher, a fellow in the Asset Building Program at the New America Foundation.
Hispanics, non-English speakers and people on food stamps are the most likely to be eligible for the credit, but not take it, she said. Those are also the groups that stand to benefit the most from it.
"It might be tougher for them filling out their taxes," she said, "but there are armies of volunteers that are across the country that have been set up exactly to help people claim these credits."
Claiming Your Credit
Lily Lo of San Francisco's Northeast Community Federal Credit Union is one of those volunteers, listed in the state of California's online database of tax professionals who will provide free tax preparation to low- and moderate-income people free of charge.
"A lot of people whose income is low think they don't need to file because they don't owe any taxes," she said. "They don't realize that if they do file, the government will send them a check."
Filing for the Earned Income Tax Credit is easy, she said. "All they need to do is show us some kind of income, provide a social security number (or green card number), proof of date of birth, and we can do it in 10 or 15 minutes," Lo said.
To be eligible to receive the Earned Income Tax Credit, an individual or family must have earned more than $3,100 in the last year but less than $13,440 for individuals and $48,279 for a family of five or more.
The amount of the refund depends on the taxpayer's income and the size of his or her family, but it's never been bigger, thanks to President Obama's stimulus package, which raised the maximum benefit to $5,657.
"Even people who get paid in cash or personal checks for house work or home health care can be eligible for the credit," Lo said. "You don't need to get a 1099" from your employer, she said. You just need to report the income to the government.
Help Claiming Your EITCThe United Way runs the Web site Earn It! Keep It! Save It! that helps California families claim their tax refunds.
California First Lady Maria Shriver has launched the Web site WE Connect , which connects Californians to the benefits they've earned.
The IRS also maintains a Web site providing information about the Earned Income Tax Credit.
New America Foundation's report on the EITC, Left on the Table, is also available on-line
Ripple Effects
Researchers say the failure of Californians to claim the EITC has implications not only for individuals and families but for the entire economy.
"All this money that would come from outside sources is left untapped," said Antonio Avalos, professor of economics at Fresno State University, who wrote the report for the New America Foundation. "If it were claimed, it would be injected into the local economy and generate a multiplier effect, creating jobs and even generating tax revenue."
In its report, the New America Foundation asserts that if all EITC refunds were claimed they would spur $1.2 billion in business sales, which would add 7,500 new jobs to the state's economy. $311 million in wages would be paid to those newly employed workers and $88 million in taxes would eventually come back to state and local government.
The report argues that if every EITC refund were claimed, there would be 2,708 more jobs in Los Angeles County, 595 more jobs in San Bernardino County and 519 jobs in San Diego County. In addition, Fresno County would gain 345 jobs, the report said, while Kern County would gain 229.
"We've always known that putting money in the hands of low-income people is the most effective stimulus," the New America Foundation's Anne Stuhldreher said. "They spend it immediately. They spend it at local businesses and that creates jobs."
This article originally appeared in New America Media.