The Earned Income Tax Credit can bring real money into low-income
households that claim it on their tax returns. The EITC brought more than
half a million dollars back to the Tohono O'odham Nation in 2003, for
instance. With the help of a free tax preparation site established by the
tribe and supported by the Internal Revenue Service, Tohono O'odham filers
claiming the EITC benefited by an average $1,600 per family. The Cheyenne
River Sioux Tribe in South Dakota had similar success with a local
coalition of partners that included a Tribal Business Information Center.
Beyond individual households, EITC benefits expand to empower whole
communities. A campaign that serves 100 tribal members can add $160,000
directly to the tribal economy. A companion effort to persuade tribal
members that EITC money spends best in their own local reservation
communities can help tribal leaders slay the age-old dragon of Indian
economies: high-leakage, low-capture revenue flows.
Communities that commit to stopping the leakage or off-reservation spending
of EITC returns, and instead aim for high capture of EITC revenue through
reservation-based spending - these communities can achieve a multiplier
effect that translates 150 EITC returns into a half-million dollar economic
impact, or even 75 returns into a quarter-million dollar impact.
We're talking real, measurable money-in-pocket economic impact. One way to
put EITC returns to work as an economic investment is through an Individual
Development Accounts program, where the return is used to start an
investment account that provides matching dollars for every dollar saved
(providing the accountholder participates in a course of community-level
Investing the EITC return in an IDA will give individual households a
running start on the multiplier effect as it moves through the community.
So for those many tribal leaders with a significant EITC-eligible tribal
membership, the time is now to begin organizing an EITC program for 2006.
It is the single largest federal aid program supporting working families.
In 2003, the federal government distributed over $36 billion through the
EITC program, more than through food stamps and Temporary Assistance for
Needy Families combined.
For EITC-eligible claimants, maximum amounts per return range from up to
$400 for a qualifying person without children to over $4,000 for a
qualifying person or family with two or more children. Congress sets that
amount, along with the maximum allowable income levels, annually. With
federal program funds getting scarce, EITC dollars can be an important
addition to household income on many reservations.
But that's not the whole story in Indian country. Potential EITC funds
often go unclaimed. Tribal members have left millions of dollars on the
table over the 30-year lifetime of the EITC. Nationwide, 15 percent of
filers eligible for the EITC don't claim it - and the figure is higher in
Indian country. In addition, the complexities of the EITC send many Indian
claimants to a professional tax preparer, whose fees reduce the EITC funds
that return to the community or household. This leakage leaves less revenue
for capture in the reservation economy.
Like anyone else, tribal members must demonstrate eligibility to qualify
for the EITC. A qualifying child, for instance, must meet standards of
relationship, age and residency. There are income limits. 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
provided by an employer doesn't have to be included in total income for
EITC purposes. Moreover, the EITC doesn't cancel out other tax credits that
may be available for children. Families may be able to receive those
credits in addition to the EITC.
Any tax season is a good time for tribal leaders to consider an EITC
program, but this year is a good time to get serious about it. The federal
budget President Bush has sent to Congress for fiscal year 2006 is not
generous to Indian people. Congress will change the president's budget
requests in many respects, but Indian funding is almost certain to lose
ground in 2006. In other words, the federal government will take out of
Indian communities money it previously provided.
Tribal leaders can put it back again through their commitment to the EITC.
First Nations Development Institute has just published a handbook for
tribal leaders who want to see tribal members claim their EITC funds to
benefit their families and communities. For copies of the manual and more
information, contact First Nations at (540) 371-5615, by e-mail at
firstname.lastname@example.org or at www.firstnations.org/EITCwb.asp.
Rebecca Adamson is the president of First Nations Development Institute and
a columnist for Indian Country Today.