Free Money Left on Table
By Armand Emamdjomeh
April 30, 2010
What if residents of California -- a state reeling from unemployment, a sagging economy and a gaping budget hole -- had access to more than $1 billion, but did not use it? What if Alameda County residents had access to $29 million and failed to take it out of the federal treasury?
That is exactly what they have been doing, according to a new report, ''Left on the Table,'' by two professors at California State University, Fresno, which was published by the New America Foundation.
An estimated 800,000 California residents will fail to claim a total of $1.2 billion in 2009 earned-income tax credit refunds, the report says.
California has the highest rate of unclaimed earned-income tax credits nationally, with nearly a quarter of qualified residents failing to claim the credit when they file their taxes, according to studies by both the Internal Revenue Service and the Government Accountability Office.
Antonio Avalos and Sean Alley, the authors of the New America Foundation study, estimate that if all eligible refunds were claimed, residents of Bay Area counties should receive well over $100 million in total.
''We wanted to show that the program is not just important for relieving poverty, but that it's also important for local economies,'' said Maria Sotero, a research associate for the Asset Building Program of the New America Foundation.
As it is, the report estimates that the nearly $456 million in refunds that Bay Area residents do claim and receive creates $481 million in sales for businesses and 2,500 jobs. Statewide, those claims bring in $390 million in state and local taxes.
''We knew for a long time that every county was leaving a significant amount on the table,'' Mr. Avalos said, ''but we didn't know how much.''
''It's just the $1 billion that we left this year,'' he said. ''When looking at the numbers since 1997, the amount of money California residents have not been claiming is close to $10 billion.''
The foundation study, Mr. Avalos said, would ''empower those making the effort to raise awareness'' of the tax.
The credit, which benefits working low-income Americans, took effect in the Nixon administration. A single person must earn less than $15,000 to qualify for a maximum credit of $457; a family of three can get a credit of as much as $5,657.
But, Ms. Sotero said, ''even though it's a simple concept, it's a complicated process.''
There are more than 20 qualifications for the credit, she said, including the requirement that a person must file an income tax return, even if he owes no tax, and must be employed.
''A large portion of those that do not claim the E.I.T.C. have no filing requirement,'' said Kelly Batson, regional director of Earn It! Keep It!, an outreach program of the United Way Bay Area.
If a person does not file a tax return, he cannot claim the credit, Ms. Batson said. But if a taxpayer failed to claim the credit this year, it can be claimed on next year's return.
''If we can let those people know that they can get the E.I.T.C. and not have to pay to get their taxes done, we will have made great strides,'' Ms. Batson said. ''Unfortunately, we don't know what we don't know.''