SAN DIEGO – New research estimates that San Diego County will miss out on $96 million in economic activity and more than 500 jobs that could have been created this year by the Earned Income Tax Credit (EITC), a federal refundable tax credit that brings refunds of up to $5,657 to lower income workers. This is because an estimated 58,000 San Diego County residents will fail to claim over $77 million in EITC refunds that stimulate the economy, according to the new report Left on the Table, published through a collaboration between the New America Foundation and economists at California State University at Fresno.
"Research has shown that programs such as the Earned Income Tax Credit have a 'ripple effect' in local economies, as most of the refunds are spent at local businesses, which can then hire and pay more workers" said Maria Sotero, a research associate for the Asset Building Program of the New America Foundation.
"It's rare for a program to both boost the local economy and support working families,” said Sotero. "And because more people typically qualify when times are hard and unemployment is up, the EITC works even better when the need is highest," Sotero said.
The EITC is a federal refundable tax credit that is designed to give a financial boost to people at the low end of the pay scale. To qualify, a resident must have earned income, not be claimed as a dependent, and meet certain income requirements, along with other qualifications. The average claim amount in San Diego County was $1,768 in 2006, the report estimates.
The EITC is widely recognized as the federal government's most effective antipoverty program, lifting millions of low-income families and children out of poverty every year while incentivizing work and stimulating local economies. As part of the American Recovery and Reinvestment Act, the income thresholds and maximum refunds have been increased for tax years 2009 and 2010.
"We found that the EITC refunds, when spent in San Diego, translate directly and indirectly into economic growth for small businesses that lead to job creation and tax revenue for the County," said Antonio Avalos, report co-author and professor of economics at California State University at Fresno.
"We've always known how important these refunds are to California families," said Anne Stuhldreher, a senior research fellow at the New America Foundation. "This report is the first to show how important they are to our local economies. By encouraging people to find out if they're eligible for these refunds, we can give struggling families a financial boost and stimulate the economy at the same time," she said.
San Diego already benefits from EITC refunds and the resulting economic activity when they are spent.
"San Diego ranks third out of all the counties in the State, as far as sales and jobs created when these refunds are spent, but it's also third in what its economy and workers will lose this year," Sotero said. "And that's because thousands of people who are eligible under expanded rules likely won't apply for their credit."
The EITC refunds claimed in the county in 2006 totaled $310 million- more than the combined incomes of all the County's tax preparers, home health aides, sheet metal workers, and roofers in 2008. But this amount could be even higher this tax year. The report's main estimates include:
- Spending resulting from San Diego County residents' receipt of the federal EITC created $349 million in business sales in the County, 2,075 jobs, and more than $87 million in wages in 2006;
- Approximately 58,564 County residents failed to claim their refunds in 2006, the report estimates, and this number is likely to increase this tax season;
- If those eligible County residents were to fully claim their EITC refunds this tax year, they would spur $96 million in county business sales ($42 million of that within the City of San Diego), pay $24 million in wages, and add 570 jobs to the County economy; and
- Statewide, the authors estimate that spending resulting from EITC claims will generate $88 million in taxes for state and local governments.
To learn if they're eligible for the EITC, San Diego residents can go to www.weconnect.net, an initiative of California First Lady Maria Shriver, or call 211 to learn about local free tax preparation services.
The New America Foundation has long worked toward helping people permanently exit poverty by advancing financial empowerment policies to make it easier for them to build savings and enter the financial mainstream.
The full report is available here: http://assetsca.newamerica.net/publications/policy/left_on_the_table
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