Column: More families now claim the EITC

For years, Oregon ranked among the bottom of the list in EITC participation, falling as low as 50th among all states and the District of Columbia for tax years 2017 and 2018. But in 2019, Oregon jumped to the middle of the pack at 29th on the list, and slightly above the national average of 79.3 percent. While there is still room for improvement, the jump in the rankings deserves attention.

The Earned Income Tax Credit is one of the most effective tools for helping working families meet their basic needs and improve their lives. In 2019, households claiming the refundable portion of the credit received nearly $2,100 on average. That figure was higher for tax filers with children. Had Oregon’s EITC uptake rate remained at 2018 levels, 22,000 fewer households would have claimed the credit, making it that much more difficult for those families to make ends meet.

While it is difficult to say for certain what has led to the increase in EITC claims, several factors may be at play. In 2017, Oregon lawmakers passed SB 398 which directed the Bureau of Labor and Industries to adopt rules requiring employers to send information about the EITC to employees alongside their W-2s. These notices aim to give better information on how to claim the credit to workers who may be eligible.

The pandemic stimulus payments may also have played a role. In order to be eligible for the first Economic Impact Payment issued in April of 2020, a person needed to have filed their taxes for either 2018 or 2019. Efforts to ensure more Oregonians received federal stimulus payments likely brought some eligible non-filers into the fold, resulting in their receiving the EITC in 2019.

Still, tens of thousands Oregonians remain eligible for the EITC but do not claim it. Fortunately, Oregon lawmakers have not lost sight of the need to improve Oregon’s EITC uptake rate.

In 2022, Oregon created the Tax Infrastructure grant program at the Oregon Department of Human Services. The Tax Infrastructure grant program can continue to improve Oregon’s EITC uptake by expanding taxpayer assistance for individuals who historically have not filed their taxes. The program not only supports a network of culturally specific, culturally responsive, and rural providers of taxpayer assistance, but also funds innovations in the tax filing system that respond to the needs of communities, especially those that have the most barriers to filing their taxes.

Another approach for ensuring Oregon families qualifying for the EITC get this vital tax credit is for the state and federal governments to enact a free tax filing system. The reality is that both the IRS and the Oregon Department of Revenue often have in their possession all of the information that goes into a family’s tax return. In a free tax filing system, the IRS and the department would send everyone a pre-filled tax form. People would have the option of submitting it “as is,” correcting it, or rejecting it and preparing a tax return from scratch. A pre-filled tax return would not only relieve many Oregon families of the cost and hassle of preparing a tax return, it would increase the share of qualifying families who claim the earned income tax credit.

Today we can celebrate the progress Oregon has made in ensuring the more families claim the tax credit that can help them make ends meet. And we can vow to continue fighting for the policies that can ensure that all the families that qualify for the EITC actually get it.

Tyler Mac Innis is a policy analysist at the Oregon Center for Public Policy. The Center researches and analyses tax, budget, and economic issues. Our goal is to improve decision making and generate more opportunities for all Oregonians. To reach the Center, call 971-279-4732, or visit info(at)ocpp.org