Confronting San Diego's double-digit unemployment rate requires local lawmakers to do more than foster job creation -- it also demands a renewed focus to retaining existing workers on the payroll. Expanding the public outreach of a key worker tax benefit may buoy more at-risk San Diegans from the torrents of our economic storm.
At issue is the earned income tax credit (EITC), a refundable federal income tax credit worth up to $5,600 for low-income workers and their families who report $48,000 or less in earned income to the IRS. The EITC is a national anti-poverty program that for more than 30 years has rewarded work and kept Americans off state and federal government assistance programs. Data from the 2008 tax year reveals that more than 23 million Americans received an EITC refund worth an estimated $49.3 billion, a sizeable figure that is expected to grow this year when workers throughout the country (including San Diego) will file their federal taxes.
To say that the EITC has made a positive impact in our region would be an understatement; the 2006 tax year saw more than one out of eight San Diego County tax filers (179,430 out of 1,335,992) receiving EITC refunds valued at $321.7 million. Understanding who is eligible for the EITC in San Diego reveals much about our everyday workforce. Cross-comparing Census and IRS data, the Brookings Institute identified the 2007 EITC-eligible taxpayers in the San Diego metropolitan area as predominantly young, Latino, and holding a high school diploma education or less. These residents are also likely to be among the poorest members of our community (59.5 percent make less than $20,000 a year in adjusted gross income), and work mostly in the retail, hospitality and construction industries, fields of work that have all felt the brunt of our national recession. When these workers fail to enroll for the EITC, our entire region suffers; according to the Government Accountability Office, 15 percent to 25 percent of qualified working Americans don't enroll for the EITC, a potential estimated loss of $48.2 million to $80.4 million to the San Diego County economy.
This isn't to suggest that San Diego leaders have been asleep at the switch on this issue. Last week, the San Diego Countywide EITC Coalition, an alliance of county government officials and non-profit community groups, held a kick-off event for their 2010 Earned Income Tax Credit Campaign, rolling out a free tax assistance program available to residents until April 15th. In just seven years, the Coalition has made considerable progress in improving EITC enrollment, and just last year, the Coalition coordinated 75 free tax preparation sites, allowing volunteers to assist completing more than 18,100 federal tax returns worth $5.9 million in EITC refunds. However, with greater support from local elected leaders, EITC enrollment can become a marquee economic recovery initiative that puts money in the pockets of more working families.
Members of the San Diego City Council should consider officially recognizing an Earned Income Tax Credit Awareness Day, dovetailing behind the County's efforts to highlight the tax credit. Other large metropolitan cities, such as San Francisco, Chicago, and New York City have made EITC outreach a signature annual program. Increasing the city's program participation today would make significant inroads as nearly half (43 percent) of all EITC recipients reside in the city of San Diego, which collected $134.2 million in the 2006 tax year. By collaborating with county officials to expand the ranks of volunteers and the number of city facilities used for public awareness (CityTV) and tax filing centers (city recreation centers), City Hall can begin closing the gap on the estimated $20.4-$34.1 million of unclaimed EITC refunds lost each year.
It should be noted that the Brookings Institute estimates 38 percent of EITC-eligible San Diegans are speaking Spanish at home, a demographic phenomenon that presents unique challenges for effective program outreach. The National Survey of American Families, as well as the city of San Francisco's local EITC experience has shown that Spanish language speakers and Latino workers are less likely to know of and enroll for the EITC than English speaking, non-Latino workers. It is of critical importance that future printed program materials and volunteer tax filers are more culturally competent and bilingual, particularly as California Latinos are experiencing a higher rate of unemployment than the state at large.
Improving San Diego's EITC public outreach can result in a financial benefit that exceeds the maximum annual refund cap, as qualified workers can legally "back-file" for the EITC and receive up to three years of tax credit refunds they've earned but not yet claimed. Improving EITC enrollment should also be a matter of community pride, as it can help San Diego receive back more of its fair share of tax dollars from Washington, D.C., reversing the deplorable "net donor" status we have today. With approximately one out of five San Diego County residents (610,144) living in EITC-eligible families, raising the bar on program outreach is one more component to securing our region's economic recovery.
Vasquez is the senior policy analyst at the National University System Institute for Policy Research.