By Dave Ranney, KHI News Service, January 12, 2012
TOPEKA — Advocates for poor and low-income families say Gov. Sam Brownback’s plan to eliminate the state’s earned income tax credit is sure to hurt those the administration says it’s meant to help.
“There’s some flawed thinking going on here,” said Tawny Stottlemire, executive director of the Kansas Association of Community Action Programs.
The governor’s plan, first mentioned Wednesday during his state of the state address, calls for eliminating the credit in 2013 and using the $90 million allocation to underwrite a $30 million expansion of the standard income tax deduction for low- and modest-income families, spend an additional $30 million on public assistance programs for families, and put an additional $30 million in the state’s Medicaid program.
In Kansas last year, about 228,000 families took advantage of the state’s earned income tax credit. The average payment was around $350.
The state-funded credit is based on a sliding-scale percentage of a family’s federal earned income tax credit.
Brownback’s proposal would not affect the federal refunds.
The average two-parent family that filed for the credit last year earned $25,000; the average single-parent family: $19,000.
“The problem with this,” Stottlemire said of the administration's proposal, “is that not everybody who benefits from the earned income tax credit is on Medicaid or public assistance. So it would appear that a fair number of people who are benefiting from for it now wouldn’t be eligible for it in the future. That’s a very big concern for us. These are people who may not be on public assistance or on Medicaid, but they’re still poor.”
Meeting with reporters Thursday, State Budget Director Steve Anderson said he was under the impression that the two groups – people on Medicaid and those collecting the tax credit – “largely overlap.”
Administration officials have not generated the data to show how many families benefiting from the credit also are on public assistance or Medicaid.
Anderson also cited a federal study that he said showed widespread fraud and abuse related to the credit.
“Depending on the state, the level of abuse was between 25 and 32 percent on EITC returns,” he said.
Anderson, an accountant, said his church expected its members to commit a percentage of their professions pro bono or charity work. What he saw helping low-income families prepare their returns supported the findings in the federal report.
He said when he warned families that it was illegal to file false claims for the credit, about 20 percent did not return.
In a handout distributed shortly after the governor’s state of state address, Anderson included a one-page listing of six federal lawsuits involving earned-income-tax-credit fraud and abuse.
“I read that list,” said Shannon Cotsoradis, chief executive of advocacy group Kansas Action for Children. “I was struck that they were cases filed against tax preparers, they weren’t against families. I don’t see the connection to Kansas.”
Community Action Programs help hundreds of low-income families file their tax returns each year.
“You can’t claim a deduction without the paperwork,” Stottlemire said. “If someone decides not to take advantage of the earned income tax credit, I doubt that it’s because they didn’t want to get caught committing fraud. It’s more likely because they didn’t have the paperwork.”
Anderson also said the earned income tax credit is inefficient because the state has little say in how parents – single mothers, for example – spend their returns.
It would be more efficient, he said, to route the money through the state’s public assistance and Medicaid programs.
Anderson said the additional state Medicaid funding would be matched with millions of dollars in federal aid thus boosting assistance to poor Kansans.
“What’s driving this,” he said, “is the assumption that there’s a better way to meet the needs of the truly needy.”
Appearing before a joint meeting of the House and Senate tax committees Thursday, Department of Revenue Secretary Nick Jordan said the governor’s proposal would produce a “much more targeted, much more accountable, much more efficient delivery of services.”
Stottlemire disagreed.
“What the administration is saying, essentially, is that the poor need to be controlled, that they can’t run their own lives, that it’s better to have the government running their lives,” she said. “I find that amazing.”
The administration's tax plan would eliminate a range of other tax credits and exemptions and reduce individual income tax rates, eliminating one of three existing tax brackets. It also would eliminate income tax for small businesses.
Anderson and other administration officials said they believed those tax reductions would spur economic growth and bring more jobs to Kansas, thereby diminishing reliance on public services.
http://www.khi.org/news/2012/jan/12/advocates-say-plan-eliminate-tax-credit-would-hurt/
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