Hearing on Earned Income Tax Credit Outreach

Date: 
Friday, February 13, 2009 - 1:00pm
Location: 
B-318 RHOB
Hearing on Earned Income Tax Credit Outreach

 

 

 

EARNED INCOME TAX CREDIT OUTREACH

 


HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT

OF THE

COMMITTEE ON WAYS AND MEANS

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION


February 13, 2007


SERIAL 110-12


Printed for the use of the Committee on Ways and Means

 

 

 

 

COMMITTEE ON WAYS AND MEANS
CHARLES B.  RANGEL, New York, Chairman

FORTNEY PETE STARK, California
SANDER M.  LEVIN, Michigan
JIM MCDERMOTT, Washington
JOHN LEWIS, Georgia
RICHARD E.  NEAL, Massachusetts
MICHAEL R.  MCNULTY, New York
JOHN S.  TANNER, Tennessee
XAVIER BECERRA, California
LLOYD DOGGETT, Texas
EARL POMEROY, North Dakota
STEPHANIE TUBBS JONES, Ohio
MIKE THOMPSON, California
JOHN B.  LARSON, Connecticut
RAHM EMANUEL, Illinois
EARL BLUMENAUER, Oregon
RON KIND, Wisconsin
BILL PASCRELL JR., New Jersey
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y.  SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
JIM MCCRERY, Louisiana
WALLY HERGER, California
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
SAM JOHNSON, Texas
PHIL ENGLISH, Pennsylvania
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
RON LEWIS, Kentucky
KEVIN BRADY, Texas
THOMAS M.  REYNOLDS, New York
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
DEVIN NUNES, California
PAT TIBERI, Ohio
JON PORTER, Nevada


Janice Mays, Chief Counsel and Staff Director
Brett Loper, Minority Staff Director


SUBCOMMITTEE ON OVERSIGHT
JOHN LEWIS, Georgia, Chairman
 

JOHN S.  TANNER, Tennessee
RICHARD E.  NEAL, Massachusetts
XAVIER BECERRA, California
STEPHANIE TUBBS JONES, Ohio
RON KIND, Wisconsin
BILL PASCRELL JR., New Jersey
JOSEPH CROWLEY, New York
 
JIM RAMSTAD, Minnesota
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
DEVIN NUNES, California
PAT TIBERI, Ohio

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also, published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

 

 


 

C O N T E N T S

 


Advisory of February 1, 2007, announcing the hearing

WITNESSES

Richard J. Morgante, Commissioner, Wage and Investment Division, Internal Revenue Service, accompanied by David R. Williams, Director, Earned Income and Health Coverage Tax Credits

Deborah Lum, Executive Director, Atlanta Workforce Development Agency, Atlanta, Georgia, accompanied by Karen R. Rogers, Director, Mayor’s Office of Weed and Seed, Atlanta, Georgia

Bonnie Esposito, Executive Director, AccountAbility Minnesota, Saint Paul, Minnesota

John Wancheck, Earned Income Tax Credit Outreach Campaign Coordinator, Center on Budget and Policy Priorities

Donna Klein, President and Chief Executive Officer, Corporate Voices for Working Families

 


 

SUBMISSIONS FOR THE RECORD

Harris, David, Children’s Research and Education Institute, statement

Murguía, Janet, National Council of La Raza, statement

Williamson, Donald, Americans For Fair Taxation, Conyers, GA, statement


 

EARNED INCOME TAX CREDIT OUTREACH

 

 


Tuesday, February 13, 2007

U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Oversight,
Washington, D.C.

The Subcommittee met, pursuant to notice, at 1:15 p.m., in room B-318, Rayburn House Office Building, Hon. John Lewis (Chairman of the Subcommittee) presiding.

[The advisory announcing the hearing follows:]


Chairman LEWIS.  The hearing is now called to order. 

This is the first Subcommittee hearing of this Committee.  I am delighted and very pleased to have each and every one of you here.  Welcome, my Ranking Member, my friend, Mr. Ramstad; and to all Members of the Subcommittee, I thank you for your attendance. 

Today, the Subcommittee on oversight will hold its first hearing of the 110th Congress.  One of the most important things that we can do as Members of Congress is to ensure that we are providing for the least among us.  Therefore, it is only fitting that we begin this Congress by looking at the Earned Income Tax Credit (EITC). 

We all agree that working America should not live in poverty; and if we have the power to lift more families out of poverty, we should make that happen.  The EITC lifts almost 5 million people out of poverty every year, and it could be happening with almost 7 million more working poor individuals and families with children.  $12 billion of assistance is left on the table every year.  It could be helping the working poor, but it is not getting into their hands. 

We can do better, and we must do better.  As Chairperson of this Committee, I am committed to making sure that every person who is eligible to claim the EITC knows about the credit and actually gets those dollars into their pockets. 

Today, the Subcommittee will explore why EITC benefits are not being received and what can be done to fix this.  We can all play a role in this effort--the Internal Revenue Service (IRS), the States and localities, the volunteer community, the business sector, and the Congress.  I look forward to exploring this more with our witnesses today and thank each of you for being here.  As I said when we went through the organizing of this Committee, that we are going to work hard and we are going to have some fun. 

Now I am pleased to recognize the distinguished Ranking Member, my dear friend from the great State of Minnesota, Mr. Ramstad, for his opening statement. 

Mr. RAMSTAD.  Thank you, Mr. Chairman.  I thank the distinguished Chair and my good friend.  You certainly represent the best and brightest in public service and personify what a public servant should be; and I am just honored to serve with you, Mr. Chairman. 

I want to thank you also for holding this hearing on outreach efforts to ensure that everyone who is entitled to receive the Earned Income Credit, in fact, claims and receives it. 

I welcome each of our witnesses here today and look forward to hearing your testimony. 

I want to particularly thank you, Mr. Chairman, for including a witness from my home State of Minnesota who came for this heat wave in Washington.  I thank the distinguished witness for being here today, Ms. Bonnie Esposito, who is the Executive Director of AccountAbility Minnesota.  This organization has a long history of mobilizing volunteers to help people in need, and that is exactly what Bonnie is doing in Minnesota with volunteer accountants and tax practitioners who help literally thousands and thousands of low-income taxpayers navigate the Tax Code, including helping families claim the Earned Income Credit.  That is a bit of big emphasis today as we hear of her organization. 

As we all know, Congress enacted the Earned Income Credit in 1975 to help lower-income workers burdened by the payroll tax at the time.  We went back and researched the Ways and Means history, and then Chairman Ullman said we are in effect rebating to the low-income groups below $6,000 most of the payroll tax they have already paid, and this is very important to a lot of people, he said. 

Well, these sentiments were echoed again by Senator Abraham Ribicoff during Senate consideration of the bill creating the Earned Income Credit when he told Senator Long that the credit would provide a work bonus to help low-income groups offset the costs of their Social Security taxes.  So, we all know the noble purposes of the Earned Income Credit.  We all know how important it is to so many people and families in our country. 

I don't think it is a reach to say or an overstatement to say that the Earned Income Credit has evolved into one of our most effective anti-poverty programs, as it has grown well beyond a program to compensate lower-income people for their payroll tax burdens; and that is a good thing.  In the last filing season, 22 million taxpayer returns received refunds of $410 billion through the Earned Income Credit.  That is the good news. 

The bad news is, as the Chairman stated, there are literally millions more who are eligible for the Earned Income Credit and aren't claiming the benefit to which they are entitled. 

So, today we hope to learn more about the outreach efforts of the IRS and of the numerous nonprofit organizations, and I certainly am looking forward to the testimony. 

I would like to, also, Mr. Chairman, thank your staff for providing the lists of free return preparation sites in each of our congressional districts.  I think that is very helpful to each of us on your Subcommittee.  There are 50, I am glad to say, 50 free return preparation sites in my own Third Congressional District, our own Third Congressional District of Minnesota. 

So, thank you again.  I yield back.

Chairman LEWIS.  I thank you very much, Mr. Ranking Member, for your statement; and, again, I want to thank each of the Members for being here and thank the staff for all of your help and all of your support to get us to where we are today. 

Now we will hear from our panel of witnesses.  I ask that each of you limit your testimony to 5 minutes.  Without objection, your entire statement will be included in the record. 

I will have all of the witnesses give their statements, and then the Members will ask questions of the panel. 

It is now my pleasure to introduce our first witness from the IRS, Richard Morgante. 

You may testify.

Mr. MORGANTE.  Good afternoon, Chairman Lewis, Ranking Member Ramstad--

Chairman LEWIS.  He is accompanied by Mr. David Williams. 

Go ahead.

STATEMENT OF RICHARD J. MORGANTE, COMMISSIONER, WAGE AND INVESTMENT DIVISION, INTERNAL REVENUE SERVICE, ACCOMPANIED BY DAVID R. WILLIAMS, DIRECTOR, EARNED INCOME AND HEALTH COVERAGE TAX CREDITS

Mr. MORGANTE.  Good afternoon, Chairman Lewis and Ranking Member Ramstad and other Members of the Subcommittee.  My name is Richard Morgante, and I am the Commissioner of the Wage and Investment division of the IRS.  Accompanying me today, as the Chairman noted, is David Williams.  He is the director of the office that oversees the EITC at IRS. 

My written statement has been submitted for the record. 

This afternoon, I would like to briefly talk about the group I think is of most interest to this Subcommittee, the 20 to 25 percent of those taxpayers eligible for the EITC who do not claim it. 

Compared to other government assistance programs, this 75 to 80 percent participation rate is fairly high, but we know we have to do better. 

When Commissioner Everson took office in 2003, he established as one of his priorities the need to increase awareness so that everyone who qualifies for the EITC receives it.  We have limited knowledge about those who are eligible but fail to claim the credit.  The evidence we do have suggests that there are a variety of reasons.  Despite our best efforts, there are still some people who are unaware that the credit exists or, if they know it exists, do not know where to get assistance in filing a claim.  Others do not understand the eligibility requirements or they do not make enough money to meet the filing threshold, so they assume they are not eligible. 

We also find that some fail to claim the credit because they distrust interactions with the IRS; and, unfortunately, some think because they receive other benefits they are not eligible to receive the EITC. 

We believe that a large portion of the non-claimant community consists of people who have limited English proficiency or who lack high school degrees.  In an effort to reach this underserved community, the IRS has increased its awareness efforts.  A few weeks ago, we sponsored the first EITC Awareness Day.  The scope of the media coverage has been unprecedented and should prove very effective in raising EITC awareness among eligible taxpayers. 

We are also attempting to improve our congressional outreach and help congressional offices give guidance and support their constituents.  Our awareness efforts do not end there.  IRS media spokespersons make EITC a priority message during the entire tax filing season.  We also intend to improve access to EITC information on IRS.gov.

We have a direct mail program to promote the EITC.  Each year, the IRS sends between 500,000 and 700,000 notices to taxpayers who appear, based on the returns they have filed, to be within the income limits for EITC.  The IRS is also sending a direct mail package to a half a million taxpayers in 10 limited-English-proficiency markets.  One of the prime areas where we really hope to increase awareness is the Advance EITC.  We are now partnering with organizations such as Corporate Voices for Working Families, who are represented here today.  These groups promote Advance EITC as an option to boost employees' paychecks. 

In addition to awareness, we attempt to leverage our relationships with stakeholder groups.  For example, we currently support EITC and other tax-assistance services provided through more than 300 community based coalitions.  These organizations regularly interact with low-income taxpayers, have built-in credibility with their local community and provide avenues of access for taxpayers who may be reluctant to work directly with the IRS. 

In addition, at our Volunteer Income Tax Assistance (VITA) and tax counseling for the elderly sites, EITC claimants can have their returns prepared free of charge.  IRS-sponsored volunteer tax preparation programs served 2.2 million taxpayers last year, double the number served 5 years ago. 

In summary, Mr. Chairman, the EITC program has grown into one of the Government's most successful anti-poverty programs.  As you noted, nearly 5 million people a year, half of whom are children, are lifted out of poverty thanks to the EITC, but we know we must do better to reach those eligible taxpayers who are not taking advantage of the credit. 

I appreciate the opportunity to be here this afternoon and will be happy to respond to any questions you may have.

Chairman LEWIS.  Thank you very much, Mr. Commissioner.  Thank you for your testimony. 

Mr. Williams, are you going to be prepared to respond to questions? 

Mr. WILLIAMS.  I will.

Chairman LEWIS.  Thank you very much.

[The prepared statement of Mr. Morgante follows:]

Chairman LEWIS.  Our next witness is from the great City of Atlanta, the city that I am blessed to represent in the Congress. 

I am pleased to welcome the Executive Director of the Atlanta Workforce Development Agency, Deborah Lum.  She is accompanied by Karen Rogers.  Thank you very much, the two of you, for being here.  I am sorry that you had to come into a snowy location.  It doesn't snow in Atlanta.

Ms. LUM.  It is 60 degrees in Atlanta.

Chairman LEWIS.  I am sorry we don't have any control of the weather here.

STATEMENT OF DEBORAH LUM, EXECUTIVE DIRECTOR, ATLANTA WORKFORCE DEVELOPMENT AGENCY, ATLANTA, GEORGIA; ACCOMPANIED BY KAREN R. ROGERS, DIRECTOR, MAYOR'S OFFICE OF WEED AND SEED, ATLANTA, GEORGIA

Ms. LUM.  Thank you for having us. 

Members of the Subcommittee, as the Chairman said, I am Deborah Lum, the Executive Director of Atlanta Workforce Development Agency; and with me is Karen Rogers, the Director for the Mayor's Office of Weed and Seed. 

We have our statement prepared for the Committee, but I just wanted to kind of recap and share with you the numbers of people that we see through Atlanta Workforce Development Agency. 

We are now seeing almost 60,000 clients per year because they are either unemployed or they are underemployed.  One of the reasons why we are so successful at seeing so many people is because the City of Atlanta has an ordinance where anyone who has a contract with the city must provide 50 percent of their entry level jobs to our agency.  So, naturally, we have quite a few people coming in, because we will have over 60,000 jobs over the next 5 years. 

Through this partnership with Weed and Seed and through the Blank Foundation, the Blank Foundation reached out to us and asked us to open an earned benefits program in our agency because we were seeing so many people. 

Also, the Mayor of Atlanta, Shirley Franklin, has adopted every Atlanta high school senior with a promise for them to have internships and go to college or technical schools.  We found out that most of these students did not go to school, either technical school or college, because their parents did not file income taxes.  So, far, through the EarnBenefits Program, we can now share with them and enroll them in our EarnBenefits Program, and then they get their taxes done which now they go to school.  We will take credit for the number of increases of students going to public schools in Georgia through the lottery Hope Scholarship, through the EarnBenefits program and through VITA.

Now I would like to ask Ms. Rogers to talk about the VITA Center that we share and the amount of money that we are increasing to the City of Atlanta.

Ms. ROGERS.  Good afternoon, I am Director of the Weed and Seed program.  Weed and Seed, in case you don't know, is the Office of Justice programs, and the goal is to decrease crime in impoverished neighborhoods.  There are over 250 Weed and Seed sites nationwide; and last year, through the capacity department and the IRS, 50 VITA centers were started in Weed and Seed neighborhoods.  With that, there were over 11,000 returns and over $50 million in disposable income put back into those communities. 

There are two VITA sites that are Community Capacity Development Office sponsored in Atlanta; and, actually, there is one in Atlanta and the other one is in Athens, Georgia. 

What I want to say is that through our partnership and the goal of our partnership with Atlanta Workforce Development Agency is to put VITA Center and EITC resources to other wealth and economic development projects and, in our case, getting these people to work as well as getting a return on their dollars from their taxes. 

I also want to say that there were 102 clients.  We have been open 2 weeks with a VITA Center.  We have seen 102 clients with refunds of $192,312, and that is as of Saturday, and 39 of the 102 were eligible for EITCs, but, with that, we want to see what other resources we can provide to those clients and building their wealth. 

That concludes my statement.

Ms. LUM.  Thank you again, Mr. Chairman, for having us and inviting us.  We would like to be able to provide any technical assistance for other cities so we can show them how they can increase their number of Earned Tax Credits through either the VITA Center or through the provider benefits.

Chairman LEWIS.  Thank you, Madam Director.  I thank the two of you for being here. 

[The prepared statement of Ms. Lum and Ms. Rogers follows:]

Chairman LEWIS.  We will now hear from the witness from the great State of Minnesota, State of lakes, beautiful State.  The Ranking Member didn't tell me to say that, but I visited Minnesota on many occasions.  It is a wonderful place, but this is not the time to be there. 

Ms. ESPOSITO.  It is a little colder there today.

Chairman LEWIS.  I would like to extend a warm welcome to Bonnie Esposito, Executive Director of AccountAbility Minnesota.  Thank you and welcome.

STATEMENT OF BONNIE ESPOSITO, EXECUTIVE DIRECTOR, ACCOUNTABILITY MINNESOTA, SAINT PAUL, MINNESOTA

Ms. ESPOSITO.  Thank you, Chairman Lewis and Ranking Member Ramstad, and thank you for that great introduction.  To other Members of the Subcommittee, I appreciate this opportunity to testify regarding outreach efforts for EITC. 

As you know, I am Bonnie Esposito, and I am the Executive Director of AccountAbility Minnesota.  Since 1971, we have been doing pro bono accounting and tax assistance and are able to help thousands of low-income taxpayers.  To give you a sense of our work, last year, AccountAbility Minnesota's volunteers helped return $13.7 million in tax refunds to over 10,900 low-income taxpayers in over 30 tax sites statewide. 

AccountAbility Minnesota is one of many nonprofit organizations that offer free tax assistance through the IRS VITA programs.  This year, the Minnesota Department of Revenue reports there are 275 VITA sites throughout the State, 40 in Congressman Ramstad's district. 

Use of tax sites has increased by 20 percent between 2004 and 2005.  However, community based organizations that offer the services are stretched to the limit, and taxpayers are often turned away because the organizations have limited resources and capacity.  We also have been open for 2 weeks, and our first couple of weeks we served over 700 households, but we were unable to see many people due to limited resources. 

EITC and the Minnesota's Working Family Credit can potentially add 50 percent to a working family's annual income.  Yet, as you know, up to 25 percent of eligible taxpayers don't claim the credit and leave millions of dollars unclaimed. 

Although the profile of these households is not known for sure, research suggests they are disproportionately from certain groups: very low income households, often without children or with many children, Latino families and other immigrants, people who have recently worked their way off of public assistance and have not filed before and low-income taxpayers who are self-employed. 

Latino families claim the credit at a lower rate than other taxpayers.  AccountAbility Minnesota services many Latino families, and our experience is they decide to seek tax assistance based on recommendations from family members or friends. 

We have had success reaching the Latino families by hiring outreach staff from their community and ensuring bilingual volunteers are available at the tax sites.  This targeted outreach takes additional resources, but it has been successful for AccountAbility. 

Also, many individuals that have recently worked their way off of public assistance do not file a tax return since they are new to the work force.  For several years, I managed the largest nonprofit Welfare-to-Work program in Minnesota.  Our case managers found that only a small fraction of their caseload filed a tax return even after they had established a work history.  Most knew they could and should file their taxes, and they were even told they would receive a refund. 

Many of the taxpayers who did not claim EITC are homeless, and the outreach to these taxpayers and the work needed to track down documentation of their income is well beyond the scope of most agencies' resources that offer free tax assistance. 

The taxpayers that we serve are among the lowest-income Minnesotans.  They are largely from communities of color, about 70 percent, and many are recent immigrants, English language learners or persons with disabilities.  Last year, our customers reported over 64 primary languages. 

We reach many taxpayers that otherwise would not file a return and therefore would not claim the credits they are due by law.  How do we do it?  Well, first of all, we recognize our strength and our weaknesses.  Our expertise is tax and accounting.  We recruit volunteers from the large corporations, Certified Public Accountant firms, and so forth, but we also recognize we need to partner with community based organizations.  They have close ties to the taxpayers that need our help the most. 

Why don't more low-income families take advantage of EITC?  Well, we believe it is not just because they don't know about it.  The Tax Code is incredibly complex, and rules often change.  Families move in and out of being eligible for the credits by even small changes in their income. 

In addition, IRS resources have been cut back dramatically.  Our local IRS used to be able to provide training and technical assistance for our program and volunteers, loaned laptops and so forth, and the amount of equipment and their time has dramatically been decreased. 

With the cutbacks at the IRS walk-in sites, more taxpayers than ever are referred to free tax assistance sites such as ours for assistance that they used to receive from the IRS. 

EITC Awareness Days and high-profile press conferences are good to help raise awareness with the general public and help organizations like mine recruit volunteers, but they do not reach the people that don't claim the credits. 

EITC outreach so far has plucked the low-hanging fruit, and what we have left are the hardest to serve.  It is targeted grassroots outreach using community based nonprofit organizations that is the most effective approach.  It also links people with free tax assistance so then they have a higher refund and don't have to pay high fees for tax prep or fall victim to predatory loans.

I urge this Subcommittee to consider funding to support nonprofit organizations in their efforts to serve the hardest-to-reach taxpayers that are not claiming EITC. 

Chairman Lewis, Ranking Member Ramstad, thank you again for this opportunity to testify; and I applaud your efforts to close the gap to serve those most in need.

Chairman LEWIS.  Thank you very much for your testimony.  Thank you very much. 

[The prepared statement of Ms. Esposito follows:]

Chairman LEWIS.  The next witness is John Wancheck from the Center on Budget and Policy Priorities. 

I am pleased to recognize you at this time, Mr. Wancheck.

Mr. WANCHECK.  Thank you.

Chairman LEWIS.  Thank you and your organization for all of your good work over the years.

STATEMENT OF JOHN WANCHECK, EARNED INCOME TAX CREDIT OUTREACH CAMPAIGN COORDINATOR, CENTER ON BUDGET AND POLICY PRIORITIES

Mr. WANCHECK.  Thank you and the Ranking Member and other Members of the Committee for the opportunity to testify today. 

I am the Earned Income Credit Campaign Coordinator for the Center on Budget Priorities.  It is a different sort of campaign than you are typically familiar with, but that is what it is.  It is--we aim it as a seasonal campaign, and the EITC has become one of the most important income supports for the working poor. 

For example, in 2006, a single working family with two children who earned between $11,300 and $14,800 can receive a credit of $4,536.  That is about 40 percent of their earnings.  The EITC strengthens work incentives while reducing poverty among working families that have low earnings, but they have to know about the credit to claim it. 

The Center considers the EITC such a significant program for low- and moderate-income workers that we have conducted our national outreach campaign for nearly 20 years.  Each year we distribute a community outreach kit, which you have in front of you--it is the folder there--and we get that out to 15 to 20,000 different social service organizations, faith-based organizations, businesses, unions, government agencies.  Among a variety of other things, fact sheets on eligibility, and includes many examples of outreach strategies to reach workers who are eligible for the credit but don't know that they qualify. 

Now in our campaign we also conduct EITC trainings with community groups in their States, and each year we conduct a 2-day training seminar in which 25 new outreach leaders from around the country go through intense training to enable them to go back to their communities and conduct outreach efforts themselves. 

We emphasize in all of this searching for ways to reach those eligible workers who may be most vulnerable to missing out; and I would add to those who have been mentioned low-income family daycare workers, grandparents who work and are raising grandchildren, foster parents, and workers who are raising older children who are permanently and totally disabled. 

In addition, families who are survivors of disasters such as hurricanes may become eligible for the EITC as a result of reduced income but have no clue that they are eligible. 

We emphasize, for the free tax filing alternatives that have been described here, these are crucial to reach eligible workers who aren't claiming the Earned Income Credit because that is boosted when you can offer the free tax preparation assistance.  The VITA sites provide a familiar setting to help workers who are uncertain about their eligibility and at the same time they can get skilled tax assistance. 

Now, we have always worked in partnership with the IRS in our efforts; and EITC outreach has become a higher priority in recent years with the Wage and Investment division and with the office of the Stakeholders and Partners in Education and Communication (SPEC). 

Local outreach coalitions have grown fairly dramatically as the IRS has shifted from simply managing the VITA program to an effort to create new community partnerships; and we have worked with IRS to involve a lot more national organizations, including the Weed and Seed program, Points of Light, for example, that hadn't previously been engaged in this effort in past years. 

To echo what Bonnie was saying, it is important to ensure that there are adequate resources for IRS work in this area of outreach.  Partners have been frustrated that SPEC has had restructured funding levels.  Some IRS agencies seem still too thinly staffed to respond to new interests, and the territory managers are spread pretty thin.  For example, the one in Louisiana also has to cover Arkansas, Alabama, and Mississippi.  There are plenty other examples with people with that kind of ground to cover.

I would like to say that one approach that would help bolster this, Bonnie referred to, is there have been proposals to have a matching grant program administered by the IRS, somewhat similar to the low-income taxpayer clinic program which helps tax filers after they have gotten into trouble with the IRS.  This will be a program that would assist community groups to serve people in the process of filing their returns and determining their eligibility.

The recent national EITC Awareness Day was a great success, and we would recommend that the IRS do that at the onset of every year.  We would also like to recommend the IRS provide a better route to accessing information about how individuals can find out where a VITA site is.  It is very convoluted to find out that information through the toll-free number at the IRS.  It is not on the IRS Web site. 

Finally, I would like to echo that there are opportunities for Members of Congress to engage and support and enhance these kinds of outreach efforts in their districts; and our longer testimony refers to some different techniques of doing that.  We will be delighted to help you with that process and work with your staff to examine some good ways to do that. 

Thanks very much.

Chairman LEWIS.  Thank you very much, Mr. Wancheck, for your testimony.  Thank you for your suggestion and recommendation. 

[The prepared statement of Mr. Wancheck follows:]

Chairman LEWIS.  I am now pleased to welcome Donna Klein, President and Chief Executive Officer for Corporate Voices for Working Families.

STATEMENT OF DONNA KLEIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CORPORATE VOICES FOR WORKING FAMILIES

Ms. KLEIN.  Thank you, Congressman Lewis.  Thank you for the invitation to appear before you today.  We welcome this hearing, your leadership, Mr. Chairman, and what the Subcommittee is trying to do to raise awareness on EITCs. 

I am Donna Klein, President and CEO for Corporate Voices for Working Families.  Prior to founding Corporate Voices, I spent 20 years as Vice President of Workforce Effectiveness at Marriott and have seen first hand how businesses are trying to take responsibility for helping employees access and receive their maximum earnings. 

Corporate Voices for Working Families is the leading national business membership organization representing the private sector voice in the dialogue on public policy issues related to working families.  As an independent 501(c)3, Corporate Voices facilitates research and provides solutions to legislators and businesses on Early Child Education and After School Care, Family Economic Stability, Workplace Flexibility, the Future of the Mature Workforce, and Youth Transitions.  Collectively, our 54 partner companies employ more than 4 million individuals throughout all 50 States, and they drive an annual net revenue in excess of $1 trillion. 

On February 1st, EITC Awareness Day, Corporate Voices released its 2007 Employer Guide to Educate Your Employees About the Benefits They've Earned.  This is fourth toolkit that we have published--and it is this lime green one that is in all of your packets; we have to make it very bright and colorful so the businesses pay attention to it.  It is published to organizations interested in helping their employees learn how to access Federal benefits such as the tax credit and also assistance with health care, food and home heating costs, et cetera. 

Employees earn these benefits every day they work, but too many do not know how to navigate the maze of programs and paperwork in order to access them.  Much of the informal information about EITC is--I am sorry--of the formal information is readily available through the Internet, but many of the workers eligible for EITC do not have access to a computer. 

Business plays a critical role in spreading the word about these important benefits.  Each year we revise the Employer Guide and release it at the beginning of the year to coincide with the employers' distribution of W-2s.  We use this window of opportunity to educate employers not only on EITC but the full array of benefits for which their employees may be eligible.

We make the Employer Guide available in English and in Spanish; and it includes a variety of materials including information on EITC, Advance Income Tax Credit, State Children's Health Insurance Program (SCHIP), food stamps, Low Income Home Energy Assistance Program, or Low-Income Home Energy Assistance Program (LIHEAP, and other such programs. 

What makes this toolkit unique is it teaches the supervisors and managers within the businesses about how to talk to employees about tax credits and Federal benefits, something they have not wanted to do too much in the past.  It gives them step-by-step instructions on how to enroll employees in Advance EITC and guidelines to help employees avoid predatory tax preparation practices. 

The Employer Guide is distributed to and utilized by our 53 partner companies and 65 strategic outreach partners who include major community based organizations and national business coalitions such as National Retailers Federation, American Hotel and Logic Association, et cetera.  Our member companies and partners utilize the Internet, corporate intranets, internal educational seminars, paycheck stuffers, copy and lunchroom posters and community partners to disseminate this information and educate employees about the benefits of EITC.  We estimate last year that, through our business members and strategic outreach partners and distribution channels, this Employer Guide reached 10 million working families.

A quarter of our member companies, or 13, have large lower-wage employee populations; and we asked them to help us quantify the impact of this toolkit.  Eight of the 13 companies employing low-wage workers used the toolkit to develop and execute a strategic EITC outreach plan.  These companies--Bright Horizons, CVS/pharmacy, HEB Grocery, Marriott International, Mellon Financial, PNC Financial, Sodexho and Save-a-Lot, most of them also are very proactive and have educational tours on Advance EITC programs.  Over a third provide free tax preparation, and two others actively refer employees to the IRS volunteer, or VITA, sites that you have already heard about.

Two companies systematically train their supervisory staff on eligibility.  Others either use internal communications channels, as I mentioned, intranets or outside recruiting and training agencies to counsel employees on EITC. 

In addition, two of our other partner companies, HEB Grocery and Sodexho, made the Employer Toolkit directly available to their employees, while Marriott went a step further to rebrand the toolkit as a Marriott product before redistributing it.  Employers are more likely to publicize access and availability of Federal benefits if it is branded as its own material to eliminate some of the stigma. 

We expect our 2007 Employer Guide to be even better received and utilized by businesses nationwide.  We have learned that Nordstroms and Hyatt plan to rebrand and redistribute the Guide this season.  Hyatt's will reach 112 domestic hotels, totaling some 40,000 lower wage employees.  We anticipate this increase in interest and distribution in part due to the renaming of the toolkit this year.  Previously, it was labeled the Employers Guide to Public Benefits.  Based on some secondary research we did, we found out that the employers are sometimes put off by labeling and pushing public benefits fearful of a stigma it may have on its own reputation.  So, we have renamed it the Employers Guide to the Benefits Your Employees Have Earned and eliminate the negative label.

In addition to the individual companies, we rely on our strategic outreach partners, the big broad business associations.  We polled 126 of our business associations, and we estimate the toolkit will reach 1.7 new employees this year based on that outreach we did.

These numbers show there is a serious commitment on the part of the business community to ensure that all eligible families access EITC. 

In a few minutes, I would like to focus on three points that we would like to make to the Committee today.

Chairman LEWIS.  You can always revise that.  We have this policy of revising and extending statements.  Your entire statement will be put into the record. 

Ms. KLEIN.  Would you like me to conclude? 

Chairman LEWIS.  You can summarize.

Ms. KLEIN.  We would like to make ourselves available to the Committee, and we would like to take the opportunity to partner with the Small Business Association, and we would like the Committee to consider the opportunity of incenting all businesses to post EITC information just as they do EEO information and ABA information. 

Thank you.

Chairman LEWIS.  Thank you very much, and thank you for your testimony.

[The prepared statement of Ms. Klein follows:]

Chairman LEWIS.  Before opening for questions, I know one of our colleagues must leave and she has been here for a while.  Ms. Tubbs Jones from Ohio. 

Ms. TUBBS JONES.  Mr. Chairman, Mr. Ranking Member, thank you for yielding me just a couple of minutes. 

First of all, I want to say to all of you who are here this afternoon thank you so much for coming. 

In Ohio, we are the seventh largest State in the country, and we have the second lowest number of EITC files returned in the country.  Whatever I can do to help change that fact, I would like to work on it with any and everybody to make that difference.  I hope to have an opportunity during the President's Week recess to work on this very issue in my district. 

The young man right here, Jorge Castro, is my staffer.  Before you leave, if you would exchange cards or whatever with him, I would be deeply appreciative. 

This is an issue that we must work on behalf of low-income folks across the country; and I thank you so much for your time and effort, Mr. Chairman, Mr. Ranking Member.  Thank you so very much for the opportunity.  I appreciate it.

Chairman LEWIS.  Thank you very much. 

Thank you very much for your wonderful testimony and your statements, and we are going to open up for questions.  I am going to ask each Member to be somewhat brief and the members of the panel to respond so each Member will have an opportunity to ask questions. 

Mr. Commissioner, I really want to thank you for being here and testifying.  I would like to know who are the approximate 5 to 7 million people who are not filing for the EITC?  Who are they and what can be done to reach them? 

I notice Mr. Wancheck and Ms. Klein have these unbelievable--I think this is from you, Mr. Wancheck.  This is a very attractive poster to be put in the visible places where people can see and get the necessary information.  You have this kit.  Haven't had time to go through the kit, but this gets my attention. 

Do you have anything colorful?  Is there enough in your budget to get one out?  I notice you have--

Mr. MORGANTE.  We have handouts as well.

Chairman LEWIS.  You have handouts.  We can do something about that budget, Mr. Ranking Member.  If you need a little more money to put up in visible places.

Mr. MORGANTE.  Certainly. 

Chairman Lewis, your first question was who are the 5 to 7 million EITC non-filers.  There are a variety of kinds of taxpayers who don't claim the credit.  We know people without children sometimes think they are not eligible for the EITC.  People who don't make enough money so they don't have a filing requirement also don't think they are eligible.  People who have limited English proficiency we find don't claim it.  People without high school degrees, people who are receiving other forms of assistance believe that they are not eligible for the EITC, and, as one of the panelists mentioned, people who are homeless are particularly difficult to reach. 

So, those are some of the types of people we know that are eligible for EITC but don't claim the EITC. 

Then, Mr. Chairman, you asked what are we doing to help them claim EITC.  Well, we believe outreach and awareness is key to reaching these people; and reaching them through the community based coalitions and our national partners we find is probably the best way to reach those folks.  Many of these folks don't trust the IRS, don't want to interact with the IRS, but they do have a trust and a relationship with the community based coalitions and partners.  So, we partner with these folks to try to reach out through education and awareness so they become aware that they are eligible and can claim the EITC and provide free tax assistance so they can file and claim the EITC. 

We actually have specific initiatives aimed for the underserved population.  We have a rural initiative, we have a Native American initiative, a disabled initiative, and we partner with groups such as those represented this morning to staff more than 12,000 free tax preparation sites across the country during the tax filing season.  Last year, those sites filed more than 2.2 million returns.  Those were prepared free of charge. 

We are also upgrading the IRS Web site to make the EITC information more accessible for individuals who have Internet access, and we are expanding our marketing and outreach and education programs.

So, Chairman Lewis, those are just a few ways that we are trying to identify and reach these individuals.

Chairman LEWIS.  Thank you very much, Mr. Commissioner. 

Ms. Lum and Ms. Rogers, I understand that the office of Weed and Seed partnered with a number of charitable organizations to open a new volunteer, low-income type of assistance site in Atlanta.  In the past, have you partnershipped with organizations and groups like Hands on Atlanta? 

Ms. LUM.  Yes.

Chairman LEWIS.  I guess you mentioned the Blank Foundation.  Is the Blank Foundation the Arthur Blank Foundation? 

Ms. LUM.  Yes.

Chairman LEWIS.  Can you tell us something about it--

Ms. LUM.  We do partner with a number of non-profits in Atlanta.  The arm of the--the Board of Atlanta Agency is 501(c)3; and, in March, we will have a day where we will invite all of the non-profits as well as health care centers to come in and have a big party for our constituents in the area, and we will then have--the law firms will be there to do their taxes while they are also participating in nonprofit activities.  We expect to have thousands of people.

Chairman LEWIS.  Thank you very much. 

Let me yield time now to the Ranking Member, Mr. Ramstad. 

Mr. RAMSTAD.  Thank you, Mr. Chairman. 

Commissioner Morgante, thank you for your outreach efforts. 

I noted in Ms. Esposito's testimony that her local IRS office was formerly able to provide training and technical assistance to her volunteers and I think you said even loaned laptops and printers to free tax sites.  Do you know why this collaborative effort was discontinued? 

Mr. MORGANTE.  Mr. Ramstad, the collaborative effort has not been discontinued.  Let me just explain through our Strategic Partnership Education and Communication organization there are about 600 people nationwide that work in that SPEC organization that was mentioned.  We greatly expanded our relationships with national partners, going from 4 to 66 over the last 5 years.  We have expanded now so that we have relationships with 300 community based coalitions; and, because of that expansion, that has stretched our staff. 

In fact, for the last 2 years we have sustained the numbers so that we have not tried to enter into additional relationships with community based organizations or expand national partners, because what I have tried to do for the last 2 years is what I have called support and sustain those relationships that we had. 

When we started out and we hired up, there was more time available as we built up the number of coalitions that we partnered with.  So, people did have more time to spend on an individual basis.  What we have tried to do is to leverage those folks, and now what we have tried to do for the last 2 years is just to hold steady so we can support and sustain those that we have. 

Mr. RAMSTAD.  So, is there a possibility that her volunteers will be able to get the training and technical assistance from the local IRS office? 

Mr. MORGANTE.  I am happy to say that the President, in his 2008 budget, did submit a special initiative for our Strategic Partnership Education and Communication area for $5 million.  That would put 46 additional people out into the field.  So, we are very hopeful that that will see its way through the appropriations process.

Mr. RAMSTAD.  So, it is simply a question of funding, bottom line.

Mr. MORGANTE.  It is simply a question of funding.  That is correct, Mr. Ramstad.

Mr. RAMSTAD.  Also in your testimony you discussed the opportunity for employers to offer an Advance EITC to their low-income workers in their paychecks.  Can you give me a ballpark figure how many employers are actually participating in this program? 

Mr. MORGANTE.  We know there are 124,000 people, which is a very small percentage of claimants, that use the Advance EITC. 

I will ask Mr. Williams--we don't have the number of employers that participate.  I am afraid I don't have that.

Mr. RAMSTAD.  Will you make that available?  I appreciate that.

[The information follows:]

One most recent data (2004) shows approximately 52,000 employers participated in the Advanced EITC of which 18,000 were participating for the first time.

Mr. RAMSTAD.  Let me ask another question. 

Ms. Klein, your testimony mentioned that the IRS is partnering with Corporate Voices for Working Families to boost employer participation in the Advance EITC program.  Would it be helpful if the IRS did a direct mailing to employers to make them more aware of this program? 

Ms. KLEIN.  I am not sure if it would make a difference or not.  Research we did in the past indicates that the employees in terms of trust level trust the IRS least, the employers second least.  So, we tried to couch everything as coming from the employer rather than the IRS.  We have found that we get greater receptivity and the uptake is greater. 

I can comment on the Advance EITC, also.  There is only a fraction of employers who use that.  It takes proactive work on the part of the employers; and the more we can do to make that easier for the employers, the greater those numbers will be.

Mr. RAMSTAD.  Perhaps you misheard me.  I mentioned a direct mailing to employers, not employees.

Ms. KLEIN.  My answer would probably be the same, unfortunately. 

Mr. RAMSTAD.  Let me ask a final question. 

Ms. Esposito, what one thing would you like to see this Congress do so we reach more eligible taxpayers who are not claiming this?  One thing. 

Ms. ESPOSITO.  Make funding available to nonprofit or other organizations that have direct contact with the groups that we know aren't claiming, targeting to the groups that have been outlined here--the homeless, English language learners, self-employed taxpayers and so forth.

Mr. RAMSTAD.  Would anybody else like to respond to that? 

Ms. LUM.  I would also probably say the older youth that are working at 18, they do not file taxes because they don't think they make enough money, but my daughter made $4,000 last year, and she received an income return of $384, which she probably would not have gotten, but, because I knew about the earned benefits piece, we were able to file her taxes.  So, I think there are a lot of college students and older youths that do not file taxes.

Mr. RAMSTAD.  I would like to thank all of the witnesses.  You truly represent a very positive and important collaborative effort, and I thank you for all of your work in the field, and I thank you for being here today.

Chairman LEWIS.  Thank you very much, Mr. Ranking Member. 

A moment or two ago we had some news that one of our colleagues, Charley Norwood of Georgia, passed.  So, I am going to ask Members of the Committee and all of the members of the panel, each one of us, to engage in a moment of silence in memory of our colleague from Georgia, Charley Norwood.

[Pause.]

Thank you. 

Now it is my pleasure to recognize the gentleman from Wisconsin, Mr. Kind. 

Mr. KIND.  Thank you, Mr. Chairman. 

I want to thank the witnesses for your testimony here today on a very important topic. 

Mr. Chairman, I think this is very fitting that this is our very first oversight hearing for the year talking about the EITC and how we can expand the knowledge and the amount of the information to the population of the country to encourage greater participation. 

Just for my own purposes, a quick background--maybe, Mr. Morgante or Mr. Williams, you have it available--of the number of people who are available for EITC, what percentage are not receiving the credit in the last tax year?  Do we know that? 

Mr. MORGANTE.  We estimate between 20 and 25 percent do not receive it who are eligible. 

Mr. KIND.  Almost one out of four.  What would be a realistic goal if we were to establish a national objective trying to lower that number?  What do you think would be a realistic, obtainable goal to encourage greater participation? 

Mr. WILLIAMS.  Mr. Kind, I think Ms. Esposito said it best.  She said we are working on the hardest part.  We have got the low-hanging fruit.  So, what we really are looking at now is reaching targeted pockets of people who are very difficult to reach.  The IRS is the best communications source for them.  So, our goal is a hundred percent. 

Realistically, we need to know more about each of those populations before we can put a number on it, but these folks here today are the people who really know where those places are and what maybe we can do together to reach those populations we are not getting to now.

Mr. KIND.  I will just open this up to anyone who wants to respond.  Do we have good information as to the reasons or the causes why people aren't filing or claiming credit for it?  Is there good data on it, or do we need more studies? 

Mr. WILLIAMS.  I did want to mention one other thing.  As you know, the Secretary, Secretary Paulson, has expressed strong interest in increasing participation among EITC taxpayers.  He has asked us to conduct a new study on participation which we are launching now, working with the Census Bureau and with other agencies.  Generally, those studies have focused on how many people are claiming it. 

We also want to look at what are the characteristics of the people who aren't and to try and get that kind of information.  We are starting that now.  I think the kind of information we hear from these folks will also help us, but we are going to do a more rigorous look at that so we will be able to target the resources that we have.

Mr. KIND.  Are we facing a situation where we have some real low-income people that they feel they don't have to pay any Federal tax and they are not filing because of that and therefore they are missing?  Is there a substantial portion of people who fit into that category? 

Ms. Esposito.

Ms. ESPOSITO.  Mr. Kind, one thing I want also to remind us that we forget--I don't know the data.  We don't do research, but I talk with a lot of low-income people.  It is really hard to be poor.  These people are really the lowest-income people who are living on the edge, just on the edge.  Just getting to work--their car breaks down, they don't have good health care, they have got kids, being a single parent, and this is just another thing to figure out, do their W-2s.  Where do they go?  They don't have the money to get it done.  Sometimes life can just be overwhelming. 

Also, within communities, sometimes there is misinformation; and people are kind of afraid of the Government or they hear from a friend.  They go to trusted sources, and that is our experience.  That is how we are able to bring people in, because we reach out to their trusted sources. 

We had a wonderful experience in the Latino community this year because we started doing workshops for the self-employed.  We hooked up with some Latino restaurants, and all of a sudden they know other restaurateurs, all of their employees are eligible.  It was a boon for us, but it was them doing the outreach, not us.

Mr. KIND.  Is this something that we should be thinking in geographic terms as well as far as best practices of reaching people?  Or will the same techniques work in inner-city Atlanta versus rural western Wisconsin as far as a public outreach campaign? 

Ms. ESPOSITO.  Our experience is it really depends on the community.  We work in rural Minnesota as well; and, again, we need to go to the communities that we believe aren't filing.  So, it might be, again, an immigrant community.  Most of the people we help--and this just our experience--do not receive public assistance.  They are working folks.  Maybe they are eligible and they don't take it or they are not eligible.  So, it isn't their traditional places.  It is not that we don't go through Head Start and use all of those as well, but it is more informal community through faith-based organizations and/or businesses. 

Mr. KIND.  You testified earlier there could be a role that congressional offices could play.

Mr. WANCHECK.  I think your Members, Sherrod Brown and Jim Cooper, have in the past worked to help launch local community outreach campaigns.  Recently, the staff of Senators Snowe and Collins attended an event in Maine to do that. 

I think that, really, especially the district staff may be especially helpful in being a resource to people who are trying to develop or expand a community coalition on reaching segments of the community business leadership, community leaders that aren't already involved, because your staff has great community experience and combining that with where the social service organizations who may be putting together a community coalition, I think that would be very valuable. 

There are a lot of materials.  You have a lot of ways of getting information out to constituents.  There are a lot of materials that can piggyback with that any of us can provide you.

Mr. KIND.  Thank you very much for this hearing today.

Chairman LEWIS.  Thank you very much, Mr. Kind. 

No Members recognized the fact that we are following the Gibbons rule, so I don't want you to think that I am not taking each one of you under consideration.  I didn't set the rule.  Mr. Gibbons created the rule. 

We will recognize now Mr. Pascrell of the State of New Jersey. 

Mr. PASCRELL.  Thank you, Mr. Chairman. 

Mr. Chairman, it is significant, I believe, that you have started off our year's work to look at those folks in our society that are working.  These are working poor.  The poor want to work, the greater portion of them do; and we need to recognize that, because when you are making many more dollars than these folks are making, you have tax lawyers you can rely on.  You have people that you can reach out to.  You have the Internet.  These are people many of whom who do not have that accessibility.  So, it would seem to me, if I could put it in so many words, these people that we are talking about today have a right to know what they are eligible for. 

So, when you have a right to know it is like veterans who we continue to shaft through the years.  Veterans many times don't know what their benefits are, and the Federal Government up to a few years ago didn't tell them what their benefits were.  So, we were ready to close a lot of hospitals because people weren't coming forward.  You have people 70, 80 years old, Mr. Chairman, veterans who fought in the Second World War, Korean War, never came forward to participate in benefits that they earned. 

Now we know that, in the past 6 years, the productivity among 94 million workers, non-farm workers, has gone up 18 percent, a little over 18 percent; and the wages of these very people went up 1 percent.  So, this is not just a question of communication.  This is not just a question of let us get the word out there.  We saw what happened with the census.  We have gotten the word out there every time we have a census, and every time we have a census we have a tremendous undercount.  There are very specific reasons for that.  We don't want to face it.  We cannot communicate with the very folks we are talking about here today on the cheap. 

So, I have a question for you, Mr. Wancheck.  I am introducing legislation this week that I intend to introduce because I believe this is one of the most serious problems we have in our culture.  It would increase the EITC for a number of people.  In order to offset the marriage penalty that currently exists, legislation would increase the income credit threshold for married couples.  I don't think you should be penalized if you get married. 

We also increased the credit for families with three or more children.  Right now, it is only up to two children.  By the way, the average household in terms of those who are in poverty have at least three and four children.  So, we are missing a lot of people here, a lot of people.  We would also increase the credit for--it would expand the EITC for childless workers.  That is another penalty that exists in the law as we see it today. 

Finally, it would permanently extend the combat pay in calculated EITC.  This is critical.  This is important.  This is significant.  Many of the folks returning, many of our veterans are working poor; and, needless to say, we need to address that. 

So, can you tell us your thoughts, Mr. Wancheck, on the need to expand the EITC and whether you think expanding the incentives may aid us in the overall outreach in the program?  What are your thoughts? 

Mr. WANCHECK.  We have supported those kinds of measures and expansions in the past and would continue to do that, I think particularly in the area of workers who are not raising children who--where, right now, the benefit is quite small and if you are at either end of the income scale there may not be very much incentive to file or it may not hit even your radar screen.  So, I think in that particular category that would boost participation by those who may now be eligible but get very little bit out of it.  Since it doesn't really offset in full even the impact of payroll taxes on those workers, an expansion in that area I think would increase participation.

Mr. PASCRELL.  Do you agree with me that these folks have a right to know what they are eligible for? 

Mr. WANCHECK.  One thing that stuck in my mind when you mentioned that the W-2 form is often the way of conveying information to workers; and we have all worked with ways of piggybacking information coming out with a W-2, but, it depends on the employer making that effort. 

The W-2 itself, you have to flip it over and look at the reverse side of the W-2 to see any mention of the Earned Income Credit.  That is the only mandate on the part of the Federal Government on what the tax system itself, in terms of the document that many workers get, is required to say.  Of course, that doesn't deal with self-employed workers, many of whom are--who have had a big payroll tax obligation, low-income self-employed workers may fall behind on that and/or even be shocked, if they are an independent contractor, the first time they realize that they owe 15 percent of the their earnings at the end of the year if they wanted to file a tax return.  So, they may go underground and not realize that there are some ways to get back in the good graces of the IRS.  The Earned Income Credit is going to offset back tax liability and still give them a refund in many cases. 

These are folks who are already running scared of the IRS, and figuring out outreach strategies that can reach them to help resolve those issues as well as connect them to their eligibility for the Earned Income Credit really requires an intensive effort. 

Mr. PASCRELL.  In my district in New Jersey, for every five that come forward, one does not.  That is totally unacceptable.  I am sure there are other districts which are worse, and some that are better. 

I just think we need to be--if we agree that they have a right to know, then we need to be doing more than we are doing right now; and I think we can put our heads together to do that. 

These are the poor that want to work.  We passed the welfare reform back in 1996.  We want to get people off of public assistance; and these folks are winding up with an increase of wages of 1 percent.  They have done what we have asked them to do, and that has increased productivity beyond anyone's imagination, and the effect on their children, the ripple effect on their children is even more incredible when you take a look at it. 

So, Mr. Chairman, thank you.

Chairman LEWIS.  I want to thank the gentleman for raising the question and bringing these concerns before us.  I think we are going to have some time to deal with it, and I promise you as a Committee we will. 

It is now my pleasure and delight to recognize the gentleman from the great State of New York, Mr. Crowley.  I have been to your district a few times.

Mr. CROWLEY.  You have indeed.  They still talk about you--and your chickens. 

You don't know about the chickens, do you? 

Chairman LEWIS.  Shouldn't go there. 

Mr. CROWLEY.  Thank you for holding this hearing, and I want to concur with my colleagues.  I think the timing of this is important.  The statement it makes about the works of this Congress and of this Committee in particular in tackling some of these issues as it pertains to the working poor in our society is an important statement you made; and I thank you, Mr. Chairman, for calling this so quickly and so early in the session. 

I also want to thank the Chairman for distributing information about our own districts as represented by Members of this Subcommittee, and I would like to thank the staff as well as the Chairman for that. 

I would agree with Mr. Pascrell as well that it is unacceptable that so many individuals who ought to take advantage of the EITC are not doing so.  In my district, the IRS has estimated there are almost 23,000 people who are eligible for the EITC but not claiming it, costing my constituents $54 million.  It is an awful lot of capital to put into a district like mine that is a working poor district in many regards.  I am not proud of the fact that, of all of the Members of this Committee, I have the most eligible and the most unclaimed individuals in the EITC system or eligibility here on this Committee. 

In stating that, I understand that the IRS sends letters to 650,000 people who are most eligible, I guess, for the EITC of approximately 5 million people who are not receiving that benefit; and I am going to ask the question as to how do we come up with 650,000 out of 5 million?  What are we doing with the almost 4 million people?  Why are we taking that expenditure and not going after everyone? 

I understand the reply rate to those letters is about 30 percent of individuals who ultimately end up getting a check.  When a EITC tax filer qualifies for EITC and gets a check, does the IRS go ahead and help them file their amended returns? 

Mr. MORGANTE.  Yes, Mr. Crowley.  We only send to 650,000 because those are the individuals we identify based on information that they filed with us.  The 5 to 7 million that the Chairman has referenced are the numbers that we estimated are eligible but have not claimed it.  As we tried to--as I outlined earlier, we tried to describe what types of people those are and the characteristics of those people, but those are the folks that we are trying to identify through our community partners and reach out to and make aware of the credit, but we only send them to those that have filed but have not claimed the credit but appear from their income levels that they may be eligible, but that is why we only send to the 500,000 to 700,000 people. 

Mr. CROWLEY.  Of those, 70 percent don't file for the EITC.

Mr. MORGANTE.  Correct.

Mr. CROWLEY.  Is that because--again, some of this has been brought before.  It could be language, it could be intimidation, whatever the factors are, does the IRS take any further steps to help those individuals file? 

Mr. MORGANTE.  When we sent the letters out advising them they may be eligible and they need to file the return, they can use a VITA volunteer site, if there is a VITA site available, or one of our walk-in sites or call our toll-free number which is available for assistance.  So, we try to refer them to assistance that is available in helping them prepare their returns.

Mr. CROWLEY.  So, beyond actually telling them where to go to get help, you don't do any more assistance to them in terms of their filing; is that correct? 

Mr. MORGANTE.  That is correct.

Mr. CROWLEY.  Some of these individuals are owed money over multiple years; is that correct? 

Mr. MORGANTE.  That is correct.

Mr. CROWLEY.  Do they have to make separate filings for each of those years that they have--

Mr. MORGANTE.  Yes.  They have to make a separate filing for each tax year.

Mr. CROWLEY.  If they use a professional accountant, are they charged for each of those filings? 

Mr. MORGANTE.  I would assume so.  That is the way that accountants normally work, and that is why we try to refer people to free tax assistance.  That is why we have more than 12,000 volunteer income tax assistance and tax counseling for the elderly sites that offer free assistance.  So, we try to encourage those folks to go for free tax preparation so they get the full benefit of that EITC, and it is not going to fees or to getting refund anticipation loans and paying additional fees on top of the preparation fees.

Mr. CROWLEY.  Does the IRS, in refunding, do they give refunds based on each year or do they give one check? 

Mr. MORGANTE.  Each year.

Mr. CROWLEY.  Each year.  You think it might be helpful if we give it back in one shot.

Mr. MORGANTE.  The way our system works, we process each year individually.  Even if they come in together, we would have to process and post each return individually for that fiscal year.  So, that would be a systemic problem to provide one check.  Chances are if they filed at the same time, the refunds are going to go out at approximately or perhaps the same time.  So, they get the money at the same time, but that would be a systems issue because we process and post individual years.

Mr. CROWLEY.  One last question.  Not based on these numbers but because of--looking at these numbers again, we were already planning on holding an EITC event in our district to get more people who are eligible to sign up and to make applications for it, but I am more convinced now than ever that it shouldn't just be an idea that we just came up with.  It is something we have to do.  It is $54 million that otherwise would be spent in my community or saved or used for living that is not being circulated within our district as well. 

So, I think it is not just about the individual and what they are missing out on and their children, it is--a lot of this money can be put back into our communities and neighborhoods and have profound benefits and impacts on our community.

Mr. MORGANTE.  We would like to work with you and reach out to those folks. 

Mr. CROWLEY.  Thank you very much.

Chairman LEWIS.  Thank you very much. 

It is my pleasure to recognize the gentleman from California Mr. Becerra. 

Mr. BECERRA.  Thank you, Mr. Chairman.  Thank you very much, and thank you to all the panel for your testimony. 

Mr. Morgante, let me try to have us focus a bit here.  If we were talking not about the EITC, but about Social Security or veterans' or disability benefits, I think all of us here would be outraged to know that one in four Americans who is eligible for that benefit is not claiming it or receiving it, and I do not think anyone here would consider the EITC a giveaway or welfare.  We are talking about folks who work very hard, but just earn very little.  So we have a program here that is meant to help people escape poverty, yet millions of Americans who qualify are not getting it. 

I would think that the IRS would be outraged that so many people who qualify are not applying for that money.  Chances are if they are not getting that money, they are doing with less for their children, or they are having to skimp elsewhere, or perhaps some of them are giving up work and deciding it is better to go on welfare rather than to work.  So, I hope there is a sense within the IRS that we should not tolerate this, that there are good, hardworking Americans who have earned that tax credit. 

So I am not sure what the attitude is within the IRS--and I appreciate your testimony and the work that you all are doing--but I think we have got to light a fire under the IRS.  This is one of those cases where it is a good thing to let folks get some of their tax money back, because these are folks who work very hard, but make very little.  So if there is a question there, it is what kind of resources in your budget are you dedicating to things like your taxpayer assistance centers, the tax, and what type of resources are you dedicating within your budget to the VITA volunteer training programs that you have? 

Mr. MORGANTE.  First of all, Mr. Becerra, thank you for your viewpoint, and we do take it seriously at the IRS.

Mr. BECERRA.  How much money are you devoting to the tax--

Mr. MORGANTE.  When Commissioner Everson came to the IRS, he established a five-point plan specifically for--

Mr. BECERRA.  If I could ask you how much money in your budget goes to your taxpayer assistance centers? 

Mr. MORGANTE.  For the taxpayer assistance centers, this fiscal year have over 1,800 full-time equivalents, $138 million, and in our--

Mr. BECERRA.  Is that more or less than the previous year? 

Mr. MORGANTE.  That is more than the previous year.  We spent $132 million, approximately.

Mr. BECERRA.  How much do you have in the 2008 for the tax? 

Mr. MORGANTE.  The congressional justification includes $140.7 million.

Mr. BECERRA.  So, you have gone from $132 million, I think you said, in 2005 to $138 million--

Mr. MORGANTE.  In 2006.

Mr. BECERRA.--in 2006.  I am sorry.  What was 2007? 

Mr. MORGANTE.  2007, $138 million.

Mr. BECERRA.  $138 million in 2007.  So, you are going to go to 140 point what? 

Mr. MORGANTE.  $140.7 million.

Mr. BECERRA.  $140.7 million in 2008, and that is going to help you take in the millions of people who qualify or the EITC who you are not capturing now? 

Mr. MORGANTE.  Well, really, the walk-in and the field assistance is one area.  The other area where we are working with our partners is through our strategic partnership education and communication area.

Mr. BECERRA.  How much extra money are you devoting to that? 

Mr. MORGANTE.  So, in fiscal year 2006 through our SPEC organization, we had $63.3 million.  This year we are spending approximately $63.8 million, and next year in the President's budget $70.2 million has been requested in the 2008 budget.  So, it is through both of those, through our SPEC program and in our field assistance program, that we try to reach out to those folks.

Mr. BECERRA.  Let me suggest to you that, with that money, you are going to come back to us, and you are still going to tell us that a quarter of all of those eligible still have not claimed their EITC.  I know it is not the fault of the men and women who work at the IRS because you can only do so much, and I already know that you all are overtaxed by just trying to collect the revenues from those who owe the taxes, but if we really do believe this is a priority to tell working Americans who make very little that they deserve this tax credit, then we have got to act like it in our budget.  I think you have Members of Congress here who are prepared to show that we mean what we say, and I hope you will take up the challenge of trying to do more to try to make it possible, because the reality is these are folks who pick up our plates, who take care of our elderly in nursing homes, who take care of our kids, who do the teaching assistant work in our schools, and if we do not feel enough of an obligation to let them know what they are missing, then I do not think we have done our job as a Government.  We may as well just tell them that it is just something for those who know it. 

My time has run out, but I hope that, at some point, you will let us also talk to you about what I think is the second problem we have with the EITC, that too much of the money that these folks--that the working class, poor receive out of the EITC goes to pay for the tax preparation to get the money in the first place, and there are too many folks who are out there securing these very high-interest, like I said, refund anticipation loans in advance because they want to get the money up front, and they are paying massive fees and very high interest to get money they have earned.  So it is not against the law, but it sure is ethically improper for some of these fly-by-nights to take advantage of some of these folks. 

So, on the front end, they do not know enough about the program, and the IRS, I do not believe, is doing enough, although I think many of you are trying genuinely to do something; and on the back end, they get a lot of the money taken away before they ever get to use it because there are folks who take advantage of them in filing the returns. 

So, I hope that we will be able to light a fire and you will light a fire under us to do more together to make you more successful and to make the work that all of the folks here are doing more successful as well.

Mr. MORGANTE.  I look forward to working with you, Mr. Becerra.

Mr. BECERRA.  Thank you, Mr. Chairman.  I yield back. 

Chairman LEWIS.  Well, I thank the gentleman for his questions, and now it is my pleasure and delight to recognize the gentleman from Ohio Mr. Tiberi. 

Mr. TIBERI.  Thank you, Mr. Chairman.  I did not realize I would move up so quickly.  Thank you.  Thank you.  Sorry I was late. 

I want to echo Mr. Crowley's sentiments.  Mr. Chairman, thank you for holding this hearing, and thank you for the wonderful information and the charts that you and your staff put together as well.  It really helps demonstrate the issue. 

Mr. Morgante, I represent central Ohio, part of central Ohio.  Earlier Ms. Tubbs Jones, who represents northeastern Ohio, made a comment with respect to our State, and I want to kind of follow up on her questions and her comments. 

I look at this sheet, and you may have not seen it, but it is the return preparation sites in my district, and I actually had an opportunity to go to one of those sites in December, a site in a poor community that has both English and Spanish volunteers, and it is appropriately located.  It is fantastic, and I looked through this sheet and these 42 sites in my district, and I see that they are located in great spots, homeless shelters, libraries, schools, senior centers, outreach centers, community action organizations, great spots.  Then I look at this handy-dandy chart that we were given that apparently is put out by the Brookings Institute, and you see Ohio here along with much of the Midwest and much of the Northeast, and it is really lagging compared to much of the South in terms of the percentage of recipients who are filing with the IRS. 

Do you have any idea what is happening and why there is a great divide, and what we can do better for the purposes of this chart, blue States?

Mr. MORGANTE.  I am going to let Mr. Williams take that question.

Mr. TIBERI.  Okay. 

Mr. WILLIAMS.  Let me address that map, because it is probably one of the most interesting things you will see. 

For those of you who are not familiar with the map, the warmer the color, I believe, the higher the concentration of people claiming the EITC in a particular area.  So, when you get to Ohio, you start to see cooler colors.

What that tells you is the percentage of the population claiming EITC.  So, if you are looking at major cities, for example, you would expect to see actually a cooler color depending on the city, with maybe a hot inner core where there is poverty.  What is stunning to me about that map is that, when you get across the South with many rural areas, you see higher concentrations of poverty, and that shows up as higher percentages of people claiming the credit. 

So, as to the question about specifically what is happening in Ohio, there may be a number of explanations.  One is there certainly are not as many people as the percentage of the population claiming the credit.

Mr. TIBERI.  Can I just interrupt you for a second? 

Mr. WILLIAMS.  Sure.

Mr. TIBERI.  I wish Ms. Tubbs Jones were here because I think she and I could argue with you that, in areas of Columbus, Cincinnati and particularly Cleveland, which she represents, you would have significantly poorer areas, and they are still blue.  Cleveland is still blue.

Mr. WILLIAMS.  Which was my point, which means that they may not be claiming the credit.  Part of our concern is about how we reach those areas.

Mr. TIBERI.  Right.  That was my follow-up question.

Mr. WILLIAMS.  There you go.

Mr. TIBERI.  Even though, I think, you have, at least in my district, appropriately put facilities where the poor are, why the disconnect?  Why aren't we reaching these folks particularly in the Midwest and in the Northeast? 

Mr. WILLIAMS.  Well, there are two things.  One is, particularly in rural areas, there are higher concentrations of poor people, so that is why you see it across the South. 

Secondly, part of the reason we are at this point is that, as Ms. Esposito pointed out, even though we have got places that are situated as you have described--I am happy to hear that you think that they are in the right spots--there are pockets of people who are not coming in.  One of the examples that sticks in a lot of people's minds is that there are people who make plenty of money to be eligible for the EITC, but not enough money to file a tax return, and so they may very well stay away from all of those volunteer sites, or they may not have kids, which turns out to be one of the biggest areas of nonclaimants, and they may think they are not eligible for the credit. 

So we have got a task to try and figure out what is in your area, what it is in each specific area around the country.  This effort is just going to get harder and harder, which is why we need people in your community as in others to tell us "What are you seeing in your area, and what can we do to help you get to those people?"

Mr. TIBERI.  Just to follow up on that, has the IRS considered or talked about maybe creating a new tax return solely for those folks who you just described who are obviously falling off the chart? 

Mr. MORGANTE.  Right.  When Secretary Paulson took office, the one thing he established is a three-point plan to look at around the EITC, and one of the aspects of his plan was to look at simplifying forms and instructions.  So, we have an effort now underway with the Treasury Department to look at ways we could simplify forms and instructions, including, perhaps, creating a separate form.

Mr. TIBERI.  Thank you. 

My time has expired, Mr. Chairman.  I will just say that Mr. Crowley had a great idea, and I think I am going to follow up and have a hearing in my district on this issue as well.

Mr. MORGANTE.  Thank you very much.

Chairman LEWIS.  Very good.  Well, thank you very much, Mr. Tiberi, for your questions, and thank you for being here. 

I want to take just a moment to thank each of you for taking the time out to come here and to testify.  I think you have been very helpful.  You made a contribution.  As for some of the Members who might have been absent, they will be able to read your statements, and you have added to the body of information we need to expand EITC outreach, and I want to again thank you. 

If there will be no other business to come before the Subcommittee, this Subcommittee will stand adjourned.  Thank you, and I thank the members of the staff. 

[Whereupon, at 2:39 p.m., the hearing was adjourned.]
[Submissions for the Record follow:]

Harris, David, Children’s Research and Education Institute, statement

Murguía, Janet, National Council of La Raza, statement

Williamson, Donald, Americans For Fair Taxation, Conyers, GA, statement


111th Congress