In the wake of Hurricane Katrina, America was shocked to discover the wretchedness of poverty in New Orleans, as unforgettable images of desperate residents saturated our television screens. Now a new state law gives tax relief for the poorest families in Louisiana, helping the most vulnerable members of society rebuild for a brighter future. If San Diego civic leaders want to fight poverty at home, they too should consider supplementing the federal Earned Income Tax Credit (EITC).
The EITC is a refundable tax credit for low-income individuals and families that appears on federal income tax returns. Those qualifying can claim a credit that exceeds their federal income tax bill, and hence the credit acts as an income support mechanism that rewards work and allows individuals to remain in the workforce. More than $30 billion each year is refundable through the EITC, helping more than four million people escape poverty – a stunning policy success. Observing the success of the EITC, several states have taken action to piggyback on the federal program. This June, Louisiana joined 21 other states in matching 3.5% of the value of an individual’s EITC. Estimates suggest that 500,000 Louisiana taxpayers will qualify and receive, on average, an additional $80 on top of the federal tax credit.
Unfortunately for San Diego’s low-income neighborhoods, the California legislature has not adopted such a policy, leaving them worse off because of Sacramento’s inaction. According to the latest figures from the American Community Survey, more than 160,000 residents in the City of San Diego live below the poverty line; among those in families, 47% are female single-parent households with at least one child 18 years old or younger. Moreover, San Diego’s rate of inflation continues to outpace state and federal inflation levels, putting even greater strains on the working poor.
Luckily, some cities are taking action. New York City provides a 5% match which each year puts $70 million into the hands of 650,000 low income workers. In the City of San Francisco, Mayor Gavin Newsom has taken proactive steps to adopt a “Working Families Credit” which benefits nearly 10,000 low-income families.
It’s encouraging to see that the EITC and its local supplements are effectively diverting billions of dollars from feeding bloated government bureaucracies to helping the working poor, but its value extends beyond smart tax redistribution. One of the features of the EITC is that to qualify, individuals need to file, at a minimum, a 1040EZ. Non-profits throughout the country have offered to help individuals fill out the form to claim the credit. This contact gives non-profits the opportunity to also introduce information about other benefit programs. For instance, in San Francisco, once the EITC match was introduced and made a priority, the City saw much greater rates of participation in other programs benefiting low-income workers, such as financial and career consulting services.
The local EITC investment is a modest way of increasing the way in which the EITC is a hand up, not a hand out.
It is time for San Diego to follow the lead of other cities which have implemented local EITC supplements. In the City of San Diego, 77,000 low-income earners received EITC funds in 2004, infusing our economy with more than $126 million in refunded federal tax dollars. A San Diego Working Families Credit that matched 5% of federal EITC receipts would put an additional $6 million back in the pockets of these hard working residents. Moreover, the attention garnered by such a modest investment in a city with a General Fund budget in excess of one billion dollars would encourage greater rates of participation in valuable non-profit and government assistance programs to help open doors for the poor and help to ensure that every San Diegan can put food on the table.
Is there room in the City’s budget for such an ambitious policy endeavor? The Mayor’s most recent Budget Outlook projects that General Fund revenue will increase by more than $150 million over the next five years. The projected General Fund revenue increase may even be larger if desperately-needed government spending reforms were enacted. The San Diego Institute for Policy Research will be releasing in coming months a study of the City’s unclassified personnel which reveals that almost $24 million was budgeted this year for mayoral staff and upper-level management in the City. Does City Hall have the political capital to search for innovative solutions to cut back on its own extravagant ways and fight poverty today? Working families shouldn’t have to wait another day to find out.
Reader Feedback
There are no comments yet for this article. Be the first to post!
Post a Comment
Feedback Rules:
Users may post more than one comment, but should not pose as multiple users. Multiple posts from the same IP address but with a different user name on each will be reviewed to determine whether abuse has occurred.
Posts with personal attacks or unsubstantiated allegations may be edited or deleted.
If you have not posted before, you will be required to verify your email address before your post is displayed.
