This 2004 report finds that more than 7,800 tax filers in the city of Cleveland and more than 14,600 tax filers in Cuyahoga County who do not currently claim the Earned Income Tax Credit (EITC) may be eligible to receive the credit. Getting these households to file could bring an estimated additional $34 million in federal money to families in this Metropolitan Statistical Area.

The EITC is a refundable tax credit available to low-income workers. For example, four-person families earning as much as $34,780 and single adults earning up to $11,230 are eligible.

Taking Credit: Boosting Participation in the Earned Income Tax Credit in Greater Cleveland, a September 2004 study by Policy Matters Ohio, reports that in tax year 2002, 726,000 Ohio families received an average EITC of $1,700 to bring a total of more than $1.2 billion in federal refund money to the state. The credit can be as large as $4,204 and can boost earnings by as much as 40 percent.

However, the report finds that many eligible families are not filing for the credit, and that many of those who do are paying large sums for someone else to prepare their tax return. Further, 46.9 percent of Cuyahoga County claimants purchase exploitative refund anticipation loans (RAL), which siphon money away from the low-income workers.

The report recommends that the state of Ohio implement legislation to regulate RAL providers as four states and the city of New York have done. The report also makes recommendations for how Cuyahoga County, the city of Cleveland and inner ring suburbs can increase participation by informing citizens about the credit, about the high costs of RAL, and about the existence of free volunteer tax preparation sites.

Conclusion and Recommendations

Short Report (six pages)

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