Best practices in asset building – a peer learning session

The Connecticut Asset Building Collaborative hosted our first session of our Peer Learning Network. The tittle of the session was “Lessons Learned: VITA and Financial Education Best Practices

Peer Learning VITAOur presenters, Lucille Sclafani (CAHS´ VITA Coordinator, center), Laura O´Keefe ( Family Financial Stability Coordinator, Village for Children and Families, right) and Andrew Geisert (Economic Empowerment Program Director at FSW, left) each focused on different areas. Lucille focused on effective strategies to promote asset building on VITA sites, with a focus on targeted programs and effective communications strategies. Laura covered how to manage volunteers successfully, with a focus on engagement and retention, and Andrew covered how to use data effectively, informing strategies and improving outcomes.

You can find the materials for each of their presentations on this link, as well as other resources that were mentioned and reviewed during the session. The presenter´s expertise on this field is wide ranging, having run complex, multi-agency coalitions with hundred of volunteers for years, so the discussion covered a lot of ground. The event also enabled the participants to establish new connections, bringing new ideas and partners for VITA and asset building, and new and potentially better services for the community.

Thanks to all of you that made it to the event – we hope this was the first of many. Hope to see you all in our next session!

An effective program with bipartisan support

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If you are looking for some effective policy proposals to help low income families thathappen to have broad bipartisan support, Washington has not been the best place to look of late. After the SNAP cuts approved last week in the House, it is hard to believe there is much interest in helping low income families in the short term.

There is one policy that it is both very effective and that has  been receiving plaudits from both sides of the aisle of late, however: the Earned Income Tax Credit, or EITC. The Center on Budget and Policy Priorities  has a great article about the EITC, a policy that both works and has some Republican Senators arguing that it need to be expanded. The data certainly shows its effectiveness:

Next to Social Security, the EITC combined with the refundable portion of the Child Tax Credit constitutes the nation’s most powerful anti-poverty program.  These two credits lifted 10.1 million people out of poverty in 2012, including 5.3 million children (see chart).  As AEI’s Michael Strain points out, the EITC “is a very effective anti-poverty tool because it supplements earnings and incentivizes employment.  Expansions of the EITC have been very successful at encouraging work, particularly among single mothers during the 1990s.”

We were very vocal, in fact, arguing for a state EITC. The state tax credit was cut last year due to the tough budget situation from 30 to 25% of the federal refund. Governor Malloy has promised restoring the state EITC to 27.5% this budget year (and to 30% in 2015), and CAHS will work to ensure this program is restored.

CAHS, through our very successful VITA program, has also worked for years to make the help families get access to the program. You can learn more about our VITA program here – and get information on all sites in the state by calling 211.

CAHS year in review: a new VITA season

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The Volunteer Income Tax Assistance program (VITA) is CAHS´longest running initiative.  For VITA, coordinates several coalitions of community based organizations in several

cities across the state to offer free tax preparation services to low income families. CAHS works as a convener, helping our partners recruit volunteers, prepare marketing materials, seek funding, coordinate efforts with IRS and train and certify volunteers. Our objective is to help working families get their tax returns filled for free, avoiding costly for profit tax preparers.

Our VITA work has informed our policy work since the start. One of our aims is to help families that are eligible for refundable tax credits (like the Earned Income Tax Credit or the Child Tax Credit) receive the full amount. Our advocacy for a state EITC derives from our experience promoting its federal version, and seeing how effective it is.

Our VITA program is growing. During the 2012 tax season CAHS coordinated a ne

Our work with VITA is not restricted to just tax returns, however. We are working with several of our partners to incorporate asset building and financial education to the services offered by our VItwork of 47 sites that completed close to 11,000 tax returns. These filings brought $18 million back to Connecticut in tax refunds; 38% of fillers were eligible to receive the Earned Income Tax Credit.   For the 2013 tax season we will be working with 53 sites; we are expecting to complete more than 12,000 tax returns.  About a third of

TA sites. In others, we are also pairing tax preparation with benefit screening.

The 2014 tax season will start by the end of January – and we are still looking for volunteers. You can sign up here, if you are interested. If you want to help CAHS bring this service to more people across the state, or you want to boost our current efforts, you can also make a year end contribution to support this program. You can do it online here – it is tax deductible, and we will appreciate your support.

The Connecticut Eaned Income Tax Credit: a primer

Governor Malloy’s spending plan for the next two years, unveiled last week,  includes a reduction to Connecticut’s EITC:

060207_taxes_vmed_11a_widecThe working poor would receive less money back as part of a program known as the earned income tax credit, according to Malloy’s proposal. Last spring, 182,000 poor families claimed the credit and received an average of $601; under Malloy’s plan, they would receive about $500.

The federal government also provides a tax credit for poor families that earn income, and the state’s credit is equal to 30 percent of the value of the federal credit — the largest of any state’s program. Under Malloy’s proposal, the state’s credit would be reduced to 25 percent of the federal credit, or a cut of about 16 percent. The maximum credit would drop from $1,767 to $1,473.

Barnes said the cut would be temporary. The administration’s plan calls for increasing the credit after the coming tax year to 27.5 percent in the 2014 tax year, and return to 30 percent in 2015.

Governor Malloy’s plan cuts the EITC to 25% of the federal in 2013, 27.5% in 2014, and restores it to 30% in 2015. Although the temporary nature of this cut is encouraging, it still means a tax increase for low-income families in the state.

We need to change this – it is important for lawmakers to hear from their constituents on this issue, and it is important to explain far and wide that the EITC is one of the most effective anti-poverty programs Connecticut has ever devised.

It is for this reason that CAHS has created a dedicated website, Connecticut EITC, with information on the EITC, detailed data on who receives it and its effectiveness, research and resources,  and the latest, most up to date information on how the state budget on this issue.  You can also sign up for updates and e-mails, volunteer, contact your legislator or tell us your story on how important the EITC is for you and your family.

The Connecticut EITC is the cornerstones of how our state helps low income families get out of poverty. It is a key social mobility program. Make your voice heard.

Helping the poor makes their lives better

I know the headline is fairly obvious, but sometimes we need to repeat the obvious these days. A new study by Hilary W. Hoynes, Douglas L. Miller, and David Simon finds that something as simple as giving money to low income families has an immediate, clearly measurable effect in infant health. To be more precise, mothers that receive a tax credit through the EITC program give birth to healthier babies (PDF):

Using tax-reform induced variation in the federal EITC, we examine the impact of the credit on infant health outcomes. We find that increased EITC income reduces the incidence of low birth weight and increases mean birth weight. For single low education (<= 12 years) mothers, a policy-induced treatment on the treated increase of $1000 in EITC income is associated with 6.7 to 10.8% reduction in the low birth weight rate, with larger impacts for births to African American mothers. These impacts are evident with difference-in-difference models and event study analyses. Our results suggest that part of the mechanism for this improvement in birth outcomes is the result of more prenatal care and less negative health behaviors (smoking).

Families with more money in their pockets spend more in prenatal care, leading to less negative health behavior. Who would have thought.

The matter is, needy families are usually well aware on what they need; they just can´t afford it. It is always easy to pick specific cases of low income families being spectacularly irresponsible with their money, but more often than not when someone receives extra cash they will use it in a way that makes sense.

When “free tax preparation” actually costs money

The tax season is here, and this means the usual barrage of ads from tax preparation services. This year one of the biggest players on this field, H&R Block, has launched a big campaign in our state touting their “free” tax services to potential clients.

This ads, however, are highly misleading. David Rothstein explains:

The truth is that the “free” program offered in Block and Jackson Hewitt stores, now with kiosks inside Walmart, is more of a ploy to get customers in the door than to offer them free assistance. To be clear, when asked, all three companies are pretty clear about that and what they are doing isn’t illegal. But is it deceptive? The program only covers the 1040 EZ form, as revealed in the fine print. Most families, especially those getting a tax refund because of the Earned Income Tax Credit (EITC), are not going to use that form. According to Block, only 16% of their clients were eligible for the 1040 EZ in 2010.

Most families do not know the nuances of the 1040 forms and enter the store thinking they are getting free tax preparation. The 1040 EZ does not cover: anyone with children who plans to claim them as dependents, anyone who wants to itemize deductions (homeowners usually), and anyone claiming student loan interest, health care credits, child credits, or retirement credits. And of course, the nation’s largest poverty relief program: the EITC. The cost of paid preparation for these items varies but the federal return ranges from $89 to $250 (not including state, local, e-filing, and other fees).

The ads are not flat out lying, but they do hide all this relevant information to the (very) small print. Any potential client that heads to H&R thinking on filling their taxes at no cost will end up having to hear a sales pitch, and probably losing money if he decides not to take any “special” offer.

This is specially galling as EITC (earned income tax credit), a tax credit for low income working families an a key component in the poverty relief efforts of both Federal and State governments is not part of the “free” tax preparation package. H&R will either make money convincing clients to get the “extra” services they actually charge for to get this benefit, or will make the client lose money if they just stick to a “free” service that may actually take money away from their pockets.

It is important to remember, above all, that there is a truly free tax preparation system in place in the state for families in Connecticut: the Volunteer Income Tax Assistance program, or VITA. CAHS is working with 45 other community partners in six coalitions to offer tax preparation for families making less than $50,000 a year in a program funded and supervised by the IRS itself. We have more information of our VITA program and a listing of sites and partners here.