EAST LANSING, Mich. – A statewide initiative to increase low-income families’ use of the federal earned income tax credit (EITC) program was a cost-effective strategy to reach participants who could benefit from the program, according to a new Michigan State University study.

“Michigan’s 2004 Statewide Earned Income Tax Credit Initiative Evaluation Report” describes the outcomes of a statewide initiative led by MSU Extension to increase the EITC refunds to Michigan’s eligible working poor households.

The EITC is a refundable tax credit for low-wage households filing federal income taxes. It raises household income and offers an incentive for job retention among low-wage earners, primarily working families with incomes between 50 percent and 150 percent of the poverty line.

The evaluation focused on Berrien, Van Buren, Wayne and Oakland counties where the program to improve access to the EITC was first piloted. It showed that the coalition-based model was cost effective in reaching the target population. For example, for every dollar spent on improving access to the EITC in Van Buren County, $29 was generated in financial impact to the community.

The federal General Accounting Office statistics, released in August 2004, show that Michigan EITC claims were up 3.9 percent from 2002 to 2003 and the total financial refund increased 3.2 percent over the same period.

Though there is not a direct link between the statewide increase and the efforts associated with the four pilot sites, those sites filed 7,165 returns and generated $4.3 million in total federal refund benefits to working households, 47 percent of which were EITC refunds.

Household income was raised through access to the EITC refund in all four sites. Adjusted gross income increases ranged from 13.7 percent to 17.5 percent per site, with an average of 14.5 percent.

Seventy-four percent of tax filers interviewed at two tax sites and responding to a mail survey anticipated spending their tax refunds within the local community. Three percent wanted to save their refunds and another 3 percent would reduce educational expenses with a portion of their refunds.

According to the General Accounting Office, Michigan’s EITC-eligible workers left nearly $400 million dollars unclaimed in 2002. Stagnant income growth for many Michigan workers in the past 20 years has made taking advantage of all potential benefits essential.

The purpose of this report was to provide information back to the Michigan Family Independence Agency and to the governor’s office on results of the overall initiative, said Susan Cocciarelli, MSU Extension specialist and the EITC statewide initiative project director.

“Assisting working households to legitimately claim tax benefits to which they are due is supported by our director and the governor,” said Don Mussen, director of income support services for the Michigan Family Independence Agency. “The Earned Income Tax Credit is one of the tools in helping low-wage families create pathways to advancement.”

MSU, the Bureau of Community Action and Economic Empowerment, and the Statewide EITC Coalition have now launched the second year’s campaign. Goals for this year include increasing the number of EITC returns to working households and helping those households keep what they earn. Additionally, individuals who are eligible for food stamps will be encouraged to participate in food resource management and food stamp nutrition programs offered through local Extension offices.

For more information visit www.michiganeic.org