Column: Earned income tax credit serves Detroit
Detroit’s effort to expand access to the earned income tax credit has put an additional $74 million and counting into the pockets of hard-working residents and families. This success was the result of proactive leadership, creative thinking, and partnerships — and it provides a great example for other cities.
The earned income tax credit is a federal benefit for working people that is often matched or supplemented by states. To receive the EITC you have to be employed, have an income below a certain threshold, and file a tax return (even if you don’t earn enough to be required by law to file). The combined federal and state EITC can add up to thousands of dollars, providing a significant boost in income for working people and their families. To put it in perspective: For a single parent of three earning the federal minimum wage, the EITC can increase overall income by as much as 41 percent.
The EITC has been shown to increase employment and reduce poverty, and it has been championed and expanded by both political parties. There’s just one problem: Millions of Americans aren’t claiming it, even though they qualify.
A 2016 study showed that around 26,000 eligible Detroit households were not claiming the credit, leaving about $80 million in refunds on the table. Nationwide, the IRS estimates that one in five eligible households do not claim the EITC.
Many people don’t know the EITC exists, or that they qualify for it. Others are aware of it but don’t know how to file for it, or where to find help. This is a fixable problem — it’s just a matter of taking action and developing a strategic approach.
Last year, Mayor Mike Duggan launched such an effort to help more Detroiters get the EITC refund for which they qualify. The city created a public awareness campaign to inform more people about the EITC, kicked off with a press conference by the mayor and followed up with billboards, brochures, ads on mass transit, stories placed in local news outlets, and more. The city invested in the program, and in partnership with the Accounting Aid Society, expanded free tax-preparation services in locations around the city and recruited 500 volunteers to help more people file returns.
A group of nonprofit partners joined forces to help with the effort, including the United Way, minimizing the impact on the city budget. A team from Bloomberg Associates — the pro bono consulting arm of Bloomberg Philanthropies — helped to develop and implement the overall strategic plan, based in part on New York City’s successful EITC expansion pilot program launched under former Mayor Michael R. Bloomberg.
The results were excellent: Approximately 18,150 more Detroiters filed for the EITC than did last year, resulting in an additional $74 million in state and federal tax refunds to Detroiters. In total, Detroiters claimed $315 million in EITC refunds. That’s money that families are using to pay bills, get out of debt, make investments, and support local businesses.
Detroit’s success story shows what’s possible when city leaders think creatively, build partnerships with others who share their goals, and engage volunteers to help put programs in motion. Helping more cities take these steps are key goals of the recently announced Bloomberg American Cities Initiative, which includes our work in Detroit. Through the initiative, Bloomberg Philanthropies has committed more than $200 million to help cities around the country by supporting bold new policies, providing technical assistance, and helping mayors engage citizens in the work of building stronger communities — and Detroit’s success expanding the EITC is a great example of what’s possible. We were able to share lessons learned in New York City to help Mayor Duggan reach his goal of expanding access to the EITC — and the result is a model we hope will continue to spread from city to city.
Rose Gill Hearn is a principal at Bloomberg Associates and a former commissioner of the New York City Department of Investigation.