Unclaimed Earned Income Tax Credits cost California's economy and low-income residents $1 billion annually

 

Dr. Antonio Avalos and Dr. Sean Alley
March 2010

 

Description

The Earned Income Tax Credit (EITC) is one of the federal government's largest resources for working low income Americans. It is widely regarded as the nation's most effective and efficient anti-poverty program and has been expanded by a series of Democratic and Republican presidents. Hundreds of thousands of Californians, however, fail to claim EITC refunds, which range from a few hundred to several thousand dollars. The families and individuals who miss out are not the only losers when these refunds go unclaimed. Local economies never benefit from this money. These dollars are never spent at local businesses so fewer jobs are created, fewer wages are paid, and eventually less tax revenue goes to state and local governments. These refunds are a foregone economic stimulus for California. This report examines the economic impact of the EITC program in California, each of its 58 counties, and select major cities. First, the authors examine the amounts of claimed and unclaimed EITC refunds. They then estimate the economic impact of EITC dollars that are injected into the state's revenue stream. Third, they estimate the foregone economic impact of unclaimed EITC refunds.