The Earned Income Tax Credit is One of the Most Effective Anti-Poverty Programs

District Dime readers should have received their W-2 by now. The W-2 form summarizes both your wages earned and your federal, state and local taxes withheld in 2011.  While the thought of tax season officially being upon us may raise some people’s blood pressure, it is also a very important time for low-income families.

Why? Tax season is the time when families can access one of the most effective anti-poverty programs around, the Earned Income Tax Credit (EITC).  And it is also the time that the DC Earned Income Tax Credit campaign ramps up, helping low-income families learn if they are eligible for this program and help them file their taxes for free.

The EITC is a refundable tax credit designed to encourage work while also offsetting the payroll and federal taxes that take a huge bite out of low-income working families’ paychecks.  In 2010, the EITC lifted 6 million people out of poverty nationwide, half of them children.  Without the EITC, the national poverty rate would have been one-third higher.

The EITC was started as a federal program in 1975. Since then, 25 states, including DC, have adopted their own state level EITCs.  The DC EITC is equal to 40 percent of the federal credit and is one of the largest refundable state-level EITC’s in the US.  In 2008, approximately one in six DC tax filers received the EITC.

The EITC can provide a significant boost to low-income families’ earnings.  For example, a single parent with two children who had $10,000 in taxable income would be eligible for a $4,000 federal EITC and a $1,600 DC EITC, boosting their earnings by 56 percent.

The DC EITC Campaign not only provides free tax preparation services to low-income families in the DC metro region but also works to provide outreach and awareness of the tax benefits that low-income families are eligible to claim. This is important because DCFPI estimates that as many as 11,000 DC residents who are eligible for the federal and DC EITC did not claim it.

I volunteer as a tax preparer with the DC EITC campaign, and I see the difference the EITC can make for low-income families.  If you’re interested in joining the effort to help low-income families access the EITC and other low-income tax benefits, visit the DC EITC’s campaign website and sign up today.