Targeting Tax Credit Outreach

1. Targeting Tax Credit Outreach Tax Credit Train-the-Trainer Seminar Center on Budget and Policy Priorities Steve Holt, HoltSolutions September 24, 2013

2. Three Outreach Goals • Battling the high cost of getting a refund • Maximizing take-up of the EITC • Facilitating universal health insurance coverage HoltSolutions

3. High Cost of Getting a Refund • Return preparation & filing • Average: around $200 • As high as $500 or more (per mystery shoppers) • Lack of transparency • Add-Ons • Application, document, processing, etc. fees • A few dollars to a few hundred dollars • Again, lack of transparency • Products: predatory prepaid cards • Fees to use & fees not to use • Required use for receipt of some state tax refunds • Products: sales financing • Products: RACs HoltSolutions

4. 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 HoltSolutions

5. Share of All Tax Filers UsingPaid Preparers HoltSolutions

6. Use of Paid Preparers – All Filers vs. EITC Filers HoltSolutions

7. Getting Your Refund – The Outreach Message • Returns prepared free at VITA sites • Self-preparation alternatives • Direct deposit (including split refunds) • Be a smart consumer • Shop around • Ask questions • Insist on responsible behavior HoltSolutions

8. Maximizing EITC Take-Up: Tools • Understanding the EITC population • Participation rates & who’s not claiming • Outreach focus & targeting • Data & benchmarking • Setting incremental campaign targets HoltSolutions

9. Basic EITC Statistics Tax Year 2010 (2011 filing season): • 19.2% of all individual income tax filers • 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 HoltSolutions

10. EITC Variability – # of Qualifying Children HoltSolutions

11. 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 HoltSolutions

12. EITC Population – It’s a Shifting Target (cont.) Ackerman, Holtzblatt & Masken(looking at 57M individuals receiving EITC 2000-2006) • Average # of years claimed: 3.2 • 30% claimed in only 1 of the 7 years • 11% claimed all 7 years • 15% claimed for 4 to 6 years Local area population variations: • In- and out-migration • Economic shifts HoltSolutions

13. EITC Participation or Claim Rates “only 75% of eligible families in Lincoln County are getting their EITC” • Very hard to determine • Biggest problem: limited data on non-filers • Plus: available data unreliable at local level • Best estimates? • At least 75% (Plueger & O’Hara TY2005 study) • Maybe 85% + • Very high for EITC-eligible who file a return • Rate probably varies some by locality & population HoltSolutions

14. 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 credit • If <$500 EITC, <70% claim rate • If $2,300+ EITC, at least 85% claim rate • Claim rate increases with # of qualifying children • at least: 56% if 0 QC / 74% if 1 / 86% if 2+ • Lower claim rate in states without income tax ? HoltSolutions

15. EITC Outreach – Keeping the Right Focus • Dual objectives • General awareness (community networks perspective) • Specific populations who may have less awareness • Be wary with “money left on the table” arguments • Speculative • Tendency to be misleading • Value of incremental targets • % increase in baseline of EITC filers • Restrained estimates of additional dollars to community • Underscore variability in population HoltSolutions

16. EITC Benchmarking & Targeting – Using Brookings EITC Website www.brookings.edu/research/interactives/eitc • Two categories: 1) All tax filers, 2) EITC filers • Based on Zip Code-level data • “Smart” assignment of data to counties, cities, metro areas, electoral districts, etc. • Multiple variables • Tax Year 2011 at main link now • Prior Tax Years (to 1997) available via old interface HoltSolutions

17. Tax Credit Benchmarking • Using Brookings EITC website: • Compare local data to national or other area data • Compare data within the local area • Incorporate other data sources, e.g.: • Brookings EITC Profiles • www.census.gov • Local IRS SPEC • Universities & civic research organizations • (perhaps most importantly) “street sense” HoltSolutions

18. Benchmarking (Local/National)– Average EITC Claimed HoltSolutions

19. Benchmarking (Local/National)– % of Tax Filers Claiming EITC HoltSolutions

20. Benchmarking (Local/National)– Average Add’l CTC (ACTC) Claimed HoltSolutions

21. Benchmarking (Local/National)– % of Tax Filers Claiming ACTC HoltSolutions

22. Benchmarking Tool – A Proxy for Participation Rates • Brookings website data includes AGI groupings • # of taxpayers in $5,000 increments • $0 - $5,000, $5,000 - $10,000, etc. • 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 HoltSolutions

23. Benchmarking (Local/National) – Relationship to Low-Income HoltSolutions

24. Benchmarking (Local/Local) – Relationship to Low-Income HoltSolutions

25. EITC – Examples of Calculating Incremental Campaign Targets HoltSolutions

26. Health Insurance Coverage –the Affordable Care Act (ACA) • Employer coverage • Medicaid / CHIP • Expansion states • Non-expansion states • Marketplaces (state-by-state) • State-run • Federally-facilitated • Federal/state partnership HoltSolutions

27. Key Considerations for ACA Categories of Coverage • Employer coverage • Adequate • Affordable • Medicaid • 133% (138%) of federal poverty line (FPL) • Patchwork eligibility in non-expansion states • Marketplaces • Premium Tax Credit (100% to 400% of FPL) • Cost-sharing subsidies • Bronze, Silver, Gold, Platinum insurance plans HoltSolutions

28. Tax Credit Outreach – ACA/EITC Population Overlaps HoltSolutions

29. ACA Implementation Resources • Navigators / In-Person Assistors • Certified Application Counselors • Marketplaces • www.healthcare.gov • State exchange websites • Community tax sites • Making projections for Premium Tax Credit advances • Facilitating information updating • Reconciling Premium Tax Credit (2015 tax season) • Determining penalties (2015 tax season) HoltSolutions

30. Targeting Tax Credit Outreach Contact information: Steve Holt HoltSolutions 3415 North 55th Street Milwaukee, WI 53216 (414) 467-6899 holtsolutions@earthlink.net HoltSolutions