Tag: earned income tax credit

This Anti-Poverty Initiative Was Born in a Hospital Waiting Room

Posted on by robbie

Dr. Michael Hole, a senior resident in pediatrics at Boston Medical Center (BMC), was used to hearing unusual questions from patients, but this mother’s was truly a first: “Can the clinic help me get my taxes done?”
Lacking an accountant’s expertise, Hole referred her to a free tax preparer. But when she returned for her newborn’s next appointment, the mom told Hole she’d taken two buses and a train across town, only to find the place closed. She tried once more the following week, but this time, she didn’t bring the right documents. Fed up, she forked over $400 to a local H&R Block — a huge chunk of her negligible four-digit annual earnings.
The woman’s experience wasn’t an aberration either, says Dr. Lucy Marcil, another BMC pediatric resident. “There were 27 free tax sites in Boston at the time, but they were rarely accessible to families. It might be in a church basement or be open from only 4 to 7 p.m. on a Tuesday. Others have a five-hour-long line of people,” she says.
Frustrated by the situation low-income families confront, Hole and Marcil cofounded StreetCred in 2015 to help working parents complete their annual tax filing. Their unique solution? Set up free prep stations at a place where parents show up regularly: In their case, the waiting room. While the doctor’s doing a check-up, a volunteer is using a W-2 and other records to fill out the parents’ Form 1040. (Often, the volunteers are employees elsewhere in the hospital, like a pharmacist or IT staff member, who receive tax-prep training from local partners.) Last year, StreetCred’s service returned more than $400,000 to approximately 200 Boston families.
Most of those savings come from applying the Earned Income Tax Credit (EITC), the federal government’s largest and arguably most effective anti-poverty initiative. Started by a Republican president in 1975 and given its current shape by Bill Clinton in 1993, the EITC is one of the few programs in Washington to enjoy bipartisan support. Essentially, working families making less than $53,500 can file a “negative tax return,” drawing a check from the IRS worth up to $6,242.
Unlike other entitlements that limit what a recipient can buy (think: WIC and SNAP’s restrictions to certain food items), the EITC’s payback is up to parents’ discretion. “A lot of what they spend money on is major expenses hanging over their head: credit card debt, a roof falling in or a car repair,” Marcil says. “Conceptually, the idea is that you take away financial insecurity and poverty and instability. Those things take up a ton of mental space, and removing some of that frees them up to be more actively engaged: reading to their kids or providing consistent schedules, rather than having to run off to a third job.” With what’s left over, Marcil adds, “they can buy fruits and vegetables for the baby, a winter coat or a high chair — all the things that we think of as necessities to raise a child that are really luxuries to them.”
There’s just one problem: One in five eligible low-income Americans isn’t actually taking the credit. By situating the refund in a medical context, StreetCred has the chance to significantly boost participation rates. For one, 92.4 percent of kids see a pediatrician at least once a year, giving the doctor — a professional that commands parental trust — a chance to ask whether they know about the credit, just like they ask about guns, swimming pools and low windows. (Not that the EITC isn’t within their purview too: It’s been shown to improve maternal and infant health by, for instance, upping birth weight and decreasing maternal smoking.)
Next tax season, which runs from January 23 through April 18, StreetCred will test out their model at three new locations: Boston Children’s Hospital, South End Community Health Center and a homeless shelter. They’ll be looking to see how many families they can reach, the error rates on returns, the refund’s impact on the family and, finally, the way the service changes the family’s relationship with their healthcare provider. And they’ll be piloting another set of services: With their tax form filled out, the volunteer can check whether the family qualifies for other social services they might be missing out on, like Medicaid or a Section 8 housing voucher.
Beginning with Boston, doctors’ checkups are getting much more comprehensive, and families are clearly benefiting from it.
Homepage photo of Lucy Marcil by Matthew Morris/Boston Medical Center

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Correction: An earlier version of this story stated that StreetCred helps parents fill out their Form 1099; they actually assist with filling out Form 1040. NationSwell regrets the error.

What Can We Learn From Sweden About Long-Term Unemployment?

Posted on by robbie

From New York to Oregon, politicians and voters have been engaging in discussions about raising the minimum wage as a way to fight the growing inequality in the United States. But policy makers in Sweden have a new idea that they say could be much more effective in putting a dent in income inequality.
The European country went through a financial crisis that left the country with high rates of long-term unemployment — a problem that continues to plague the U.S., too. In the early 2000s, according to CNN Money, the U.S. had a pretty low rate of long-term unemployment. But since the financial crisis, more than 35 percent of unemployed Americans have been unemployed for six months or more. Long-term unemployment is a vicious cycle: Employers are less likely to hire someone who has been out of work for more than six months, making it’s harder and harder for someone who is unemployed to get a job.
To combat long-term unemployment, Sweden tried six social programs and found one that really works. It’s called a wage subsidy program, and it’s pretty straightforward: The government pays part of a worker’s wages, giving companies an incentive to hire workers that were previously unemployed.
In Sweden, the government paid half of a worker’s wages for the first six months of a job. This meant that companies who were hiring unemployed people didn’t have to take on a huge risk — they could get a six month trial period for half the cost.
This idea has actually been batted around in the United States before, as an alternative both to raising the minimum wage and to reforming the earned income tax credit. Politically, however, wage subsidy programs have some obstacles to overcome. Democrats are committed to raising the minimum wage, and this type of program might appear to be a sort of welfare program for the unemployed.
But Sweden is the home of a number of excellent ideas, including IKEA, Absolut Vodka, and Pippi Longstocking. With that kind of track record, maybe the U.S. should give wage subsidy programs a try.