Revealing the People Behind Tax Credits
The community tax world tends to lump together the tax credits that have been the core motivation of this work. “The EITC…and other tax credits” is the usual formulation (though sometimes the Child Tax Credit (CTC) gets its own billing).
It’s worth taking time now and then to think about the distinct populations served by the tax credits lower-income households can claim through their tax returns. The data collection processes in place at many tax sites provide many insights.*
At community tax sites in the 2010 tax season, EITC filers tended to have much lower incomes – with a median AGI of $11,600 – than filers for the CTC ($20,960), higher education credits (EduCs, $25,510), or the Child and Dependent Care Credit (CDCC, $29,270).
One obvious reason is the differences in refundability among these federal credits. A completely non-refundable credit such as the CDCC is available only to those with incomes sufficiently high to incur an income tax liability.
But differences in the populations served are also important. EITC claimants with dependents – having a median AGI of $17,600 – were more similar to CTC claimants; their median ages were 39 and 38, respectively. EITC claimants without qualifying children were much older as a group (median age of 47) and poorer (median income of $6,960, reflecting the much lower income ceiling for that version of the credit).
The pattern among EduCs claimants is both similar and different. Those with dependents had higher incomes: a median AGI of $33,510 compared to $19,900 among those without dependents. However, the former were older, with a median age of 44 compared to a median age of 27.
Again, this reflects credit design. Thirty-five percent of EduCs claimants without dependents were under 25, but persons under 25 without a qualifying child cannot claim the EITC. Higher education students tend to be younger in general, and only 5 percent of EduCs claimants without dependents were age 55 to 64; a quarter of EITC claimants without a qualifying child were in this age range.
The design of refundability matters, too. Between the 2008 and 2010 filing seasons, the earnings threshold for CTC refundability dropped from $11,750 to $8,500 to $3,000. At the community tax sites, the median AGI of CTC claimants dropped from $24,630 to $23,500 to $20,960. More strikingly, the percentage of CTC filers with incomes under $20,000 rose from 32 percent to 39 percent to 47 percent. The average CTC claimed by this group also went up significantly, from $634 to $777 to $984.
The data available from tax sites tell a rich story that can inform everything from site operations to policymaking. It’s important not to forget the potential power of the numbers.
* The data used here (representing 194,018 tax returns) are from community tax preparation campaigns participating in the Annie E. Casey Foundation’s National Tax Assistance for Working Families Campaign (NTA). For the 2010 tax season, 37 campaigns reported data.