Thursday, January 08, 2015YOUNGSTOWN, Ohio -- Low-income taxpayers who qualify for the Earned Income Tax Credit would be eligible for an advance of up to $500 for families with children and $133 for workers without children under legislation being proposed by U.S. Sen. Sherrod Brown.
The Early Refund EITC would provide an alternative to borrowing from payday lenders for many of these workers. Brown told reporters on a conference call Wednesday.
The proposal would allow workers to apply to their employer for an advance on the tax credit during the second half of the year, Brown explained.
“It’s money they’ve earned. It’s money they can claim each tax season,” Brown said. “So the question is this: What if instead of taking out a predatory loan that can trap a young woman or middle-aged man into a cycle of debt, what if that cash-strapped low-income worker could get an advance on a tax refund he’s already earned?”
The employer would be reimbursed for the advance by the federal government and the money would be subtracted from the EITC when the taxpayer files their annual federal return. Because the Early Refund EITC would not be available until the second half of the year, “This is always money they’ll be able to pay back because they’ve already earned it through their going to work every day and working and earning money,” Brown said.
Some 833,000 Ohioans and 23.6 million Americans would be eligible to access the Early Refund EITC, the Center for American Progress reported.
In 2012, according to data released by Brown’s office in December, 8,856 income tax filers in Columbiana County, 21,201 in Mahoning County and 18,193 in Trumbull County received the Earned Income Tax Credit. During that year, more than 26 million taxpayers received a lump sum refundable credit through EITC after filing their income taxes of $3,000 on average. “That is real money. That’s dollars in their pockets for somebody not making a whole lot of money,” Brown said.
“It’s enough for in many cases to get them through the week or the month without them having to go to payday lenders until they get their entire EITC,” Brown said.
Also during 2012, more than 12 million Americans used payday loans. The average payday loan is less than $400 but the borrower can end up paying hundreds of dollars in interest as the loan rolls over, sometimes more than the amount of the original loan.
Payday lenders in the United States now outnumber Starbucks and McDonald’s locations combined, Brown said.
“The payday loan industry has engaged in predatory lending practices,” he remarked. “I don’t begrudge the people that are working there; most of them are low-income people themselves that are working there in payday loan stores.
“What I object to is predatory lending,” he continued. “When somebody gets a loan for $400 and they end up paying $500 in interest because the loan’s turned over several times, that’s not fair to them and it’s not good for our neighborhoods and our society.”
Rebecca Vallis, associate director of the Poverty to Prosperity program at the Center for American Progress, supports the proposal, according to Brown’s office. “The EITC is already one of the nation’s most effective anti-poverty tools, so strengthening this program is a common-sense proposal that should win support among Democrats and Republicans alike in the new Congress,” she said in a statement.
Brown said he has heard his colleagues indicate support for the EITC and some -- including Republican Sens. Rob Portman, Jeff Sessions and Marco Rubio -- advocate for a wage support component similar to the his early refund proposal. “It’s something we can certainly sell to a number of people,” he said.
Copyright 2015 The Business Journal, Youngstown, Ohio.
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