To tens of millions of Americans, the Internal Revenue Service is a source of income, not a dreaded tax collector. Though not widely known, the IRS administers "one of the federal government's largest benefit programs for working families and individuals." By claiming certain "credits," primarily the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit, eligible tax filers receive a check from the IRS even if they have paid no federal income tax during the year. The EITC is a form of negative income tax, the merits of which will not be debated here. EITC is the "largest cash assistance program targeted at low-income families." In 2008, of the approximately 142 million Forms 1040 filed, 25 million included EITC claims totaling $51.6 billion. After considering income tax and FICA offsets, the IRS paid out $45 billion in EITC benefits for the 2008 tax year. Another $20.5 billion was paid for Additional Child Tax Credits. In 2009, according to the IRS, over 26 million people received nearly $59 billion in EITC benefits. These amounts don't include similar benefits paid by many state governments.
As strange as it sounds, the IRS is in the middle of an extensive marketing campaign to find more EITC claimers, asserting that one in five eligible recipients is missing out on government largesse. Word is being spread through web, radio and print media and "65 national partners, 370 community-based coalitions and thousands of local partners." Jan. 28 was the "5th Annual Earned Income Tax Credit Awareness Day." The past two Saturdays, selected IRS offices were open in order to provide special assistance "to EITC eligible taxpayers."
The IRS has a dedicated website, EITC Central, that includes sample Tweets (Facing hard economic times? See if you qualify for EITC), sample letters to the editor (...many working people are overlooking an important tax credit that could put anywhere between $2 to more than $5,600 into their pockets...), and even a link to liberal think-tank Brookings Institution's EITC friendly literature. Euphemisms and doublespeak abound in this area ("You earned it. Now file, claim it and get it"). A tax credit is not a reduction in tax liability. A refund is not a return of taxes paid or advanced. Taxpayers are payees. And though the IRS claims "it is not welfare," it is. In fact, it's one of the primary federal "social safety net" programs. The EITC was enacted in 1975, primarily as a way to offset the burden of Social Security taxes and "to provide an incentive to work." In 1990, $5.2 billion in EITC payments (net of tax offsets) were paid to 12.5 million recipients. Since then, costs and recipients have ballooned. Government audits have concluded that up to one-third of amounts paid were the result of fraud or error. Politicians fancy IRS-administered welfare programs because they can increase government spending (and foster dependency) under the guise of reducing taxes.
A sign of the times.