What would you do with an extra $2,500 in the bank? Put a down payment on a car? Take a vacation? Squirrel it away to pay for college? Just, have it?
You could be doing any of those already—at least if you are one of the nearly 250,000 Philadelphians who qualify for an Earned Income Tax Credit (EITC), a federal rebate program that puts money in the pockets of working Americans when they file their federal income taxes. Part of a 35-year-old program, the money is granted to anyone making between $15,000 (for a single person) and around $55,900 (for a family)—a range that includes way more people than actually apply for the funds.
In Philly last year, over 188,000 people took advantage of the EITC, collectively earning around $500 million. Another 50,000 who qualified did not, leaving about $130 million with the federal government that could have been spent here. While the average cash back is $2,500, the credit ranges from about $500 to $6,550.
For a sense of what that means consider this: A single parent of two who earns $15,000 a year could get as much as $5,828 back when she files her taxes—more than a third of her annual income. Plus, if you qualified in the past three years and didn’t apply, you still can, potentially seeing a cash bump to the tune of (on average) $10,000.
“It can really be a lot of money,” says Frank Breslin, Philly’s revenue commissioner. “We’ve seen stories—someone finds out they’re qualified, and can get four years of EITC, and they’re buying a used car, paying off old bills, really making a difference in their finances.”
As in the past several years, Breslin this month is kicking off the City’s annual You Earned It campaign to spread the word about EITC to every qualifying Philadelphian, and to help them fill out the paperwork needed to get their money by the April 15 tax deadline.
Last year, tax filing centers helped file 26,000 returns, saving Philadelphians over $7 million in tax prep fees. Now the challenge is making sure everyone who qualifies for EITC gets in on it.
Along with partners CEIBA, United Way and the Campaign for Working Families, the City offers 21 free tax prep sites throughout the city with IRS-certified volunteers (in multiple languages), as well as six additional sites where taxpayers can get guided assistance to answer their filing questions. (The website youearneditphilly.com has all the relevant info.)
Last year, Breslin says, those centers helped file 26,000 returns, saving Philadelphians over $7 million in tax-prep fees. Now, Breslin says, the challenge is making sure everyone who qualifies for EITC gets in on it.
“The number of people who file for EITC has been rising,” he says. “But every year, there’s new people who qualify—people joining the workforce, people who have an increase in family size, people whose income has been reduced and for the first time qualify. The population is constantly changing.”
The EITC feels like a throwback to a time when the federal government seemed, truly, to be looking out for working-class Americans. It was first signed into law by President Ford in 1975, then expanded in 1986, under President Reagan, who considered it “the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress.”
He may have been right: Multiple studies from both sides of the aisle have shown EITC is the single best government-sponsored poverty relief program that exists.
That’s because many working Americans walk a precarious knife’s edge when it comes to financial stability. More than 75 percent say they live paycheck to paycheck, putting them one catastrophe—an illness, a broken appliance, an unexpected move—away from insurmountable debt or even poverty.
Around 82 million Americans work jobs that pay by the hour, with nearly 2 million earning at or below the federal minimum wage of $7.25 per hour—a number that hasn’t changed since 2009. A full-time minimum-wage worker earns $15,000 a year—the minimum needed to qualify for EITC.
As a decades-long veteran of Philly’s Revenue Department, Breslin has spent most of his career ensuring the City receives the taxes that it’s owed. This is a different side to the tax collection agency: “We take seriously the mission to provide assistance to taxpayers and residents,” Breslin says.
EITC was first signed into law by President Ford in 1975, then expanded in 1986, under President Reagan, who considered it “the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress.”
That includes spreading the word about and making it as easy as possible to get EITC credit, but also a number of other local programs, including Homestead Exemption, which gives homeowners up to $625 off their property taxes; Senior Citizen Real Estate Income Tax Freeze, which lets residents over 65 lock in their property tax at its current value; and the TAP program that pro-rates water bills for low-income households.
And, Breslin says, the department can do even more: “One of the messages we try to get out is, If there’s a challenge in paying your taxes, reach out. We have a lot of programs, lots of ways to get you in compliance.”
Philadelphia, as Breslin well knows, is the big city with the highest poverty rate in the country. It is also a city with hundreds of thousands of low- and moderate-income workers, those whose jobs don’t earn them enough to reliably stay afloat.
It shouldn’t be that way; people who work full-time should know they can support their families, save for college, stay in their homes. That requires Philly to greatly increase the high-paying jobs available to Philadelphians—and it may require a change to the way we do business here, and in America.
Will government step in to push that change along? Who knows. In the meantime, though, there’s a relic of a government program to help out.
“We encourage families to work, but there are people out there really being challenged in their expenses,” Breslin says. “This is a way of putting money back into their pockets. It can be a life-changer for some people.”
Want more Philly tax news? Check out these related articles:
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- This B Corp has provided more than a million people with financial services normally reserved for the well-off
- GOP-sponsored state legislation aimed at reducing welfare costs may just end up costing you more
Correction: An earlier version of this story misstated the maximum family income that can qualify for an EITC. It is $55,900.Photo by Jp Valery on Unsplash