As the tax season approaches, we can all use a little extra reason to like Uncle Sam.
If you are earning a low-to-moderate income in Indian country, you've got a reason in the Earned Income Tax Credit. And the great thing about it - the reason you should keep reading even if you don't normally get a tax refund - is that this Earned Income Tax Credit is refundable. That is, depending on your taxable earned income, you may be able to receive the EITC as a refund on taxes you've already paid, even if your tax return doesn't offset it.
Now what's not to like about that, especially since we're talking real money here. If you lived with two or more children in 2003 and your family earned less than $33,692, your EITC refund could be up to $4,204. If you lived with one child and your income was below $29,666, your EITC refund could be up to $2,547. And if you had no children and earned less than $11,230, your EITC refund could be several hundred dollars. (In all cases, the income eligibility level is $1,000 more if you are in the Internal Revenue Service category of "married filing jointly.")
In addition to these income guidelines, you will still have to meet a few eligibility tests to qualify for the Earned Income Tax Credit. A qualifying child, for instance, must meet standards of relationship, age and residency. Above all, they call it the Earned Income Tax Credit for a reason: the income must be earned. It can't be welfare benefits, for instance. On the other hand, non-taxable compensation, such as day-care benefits that may be provided by an employer, doesn't have to be included in total income for purposes of claiming the EITC.
Moreover, the EITC doesn't cancel out other tax credits that may be available for children - you may be able to receive those credits in addition to the EITC.
Finally, several Indian-populous states - Oklahoma, Minnesota, Wisconsin - have enacted state EITCs that build on the national one.
Clearly, one drawback to the EITC is that it can be complicated to apply for. But a great deal of assistance is available, including of course paid assistance from commercial tax preparers. But don't let that put you off. If you meet the guidelines given above, stick with it because the refund will be worth the brief inconvenience of lining up less- costly assistance. A phone call to Sarah Dewees at First Nations Development Institute, (540) 371-5615, is one place to start. If you have access to the Internet, another good place to go is the National Tax Coalition's Web site at www.tax-coalition.org.
Though Indian country has never benefited as fully as it could from the EITC, it has nonetheless benefited considerably. In the 2001 tax year, for example, tax filers on the Navajo Nation received an average EITC refund of $1,520, with a total of almost $1.3 million in such refunds reaching the reservation.
We must remember that the EITC is politically popular because it helps to stabilize the financial situation of low-to-moderate income families. That is an important goal in itself, given the many subsidiary benefits that come to communities when families are able to improve their standard of living through an EITC refund. Native wage-earners who take the trouble to file for the EITC are making an investment in their communities. The EITC is meant as an investment in communities.
That puts the EITC in a more popular political category than simple revenue transfer measures such as the Women, Infants and Children food program, which has been proposed for budget reductions in 2005.
More and more, the EITC is this nation's leading anti-poverty program. More and more, Native communities must learn to take advantage of it.
Rebecca Adamson is the president of First Nations Development Institute and a columnist for Indian Country Today.