By Sue Parks / Orange County Register
The current economic expansion is among the longest in our nation’s history. With the unemployment rate around 4.5 percent, we’re nearly at full employment. Yet these successes mask a stark reality for families struggling despite the boom times. This is especially true for those here in Orange County, who work hard yet continue treading water due to the skyrocketing cost of living.
That’s why United Way and its corporate and community partners are committed to equipping local families and individuals with the skills needed to compete in an ever-evolving workforce. Equally important, we’re providing financial management training that helps them manage their household budgets, save money and keep more of their hard-earned tax dollars.
Our Volunteer Income Tax Assistance and Free Tax Prep partnerships, for example, have helped local families and individuals save thousands of dollars each year through the Earned Income Tax Credit. This credit helps offset federal payroll and income taxes for families earning less than $53,500, allowing them to deduct nearly $6,300 per year.
I recently learned about one of the individuals who benefits from this program. Gloria, who didn’t even know about the EITC before signing onto our services, was thrilled to learn that she would get back $1,828 from the federal EITC, along with $1,319 credit from new state EITC. These unexpected funds helped her purchase four new car tires so she can get her grandson, whom she is raising, safely to and from school.
When Orange County families like Gloria’s keep more of what they earn, our local economy benefits. What’s more, it offers hope. This pro-work, anti-poverty tax credit is one of the most effective tools available for families to keep their heads above water. In 2015 alone, this powerful credit lifted 6 million people out of poverty, including 3 million children.
That’s why proposals at the federal level to reduce or eliminate the EITC as part of tax reform and simplification raise serious concerns. While most of us can appreciate a simpler tax code, eliminating a vital tax credit that benefits so many families is a non-starter.
If anything, Congress should expand the EITC, which currently excludes many younger workers as well as those who can’t claim children on their taxes. In fact, 7.5 million Americans in these groups are taxed into poverty every year largely because they can’t access the EITC. This includes non-custodial parents who still contribute to child expenses, veterans returning home to find stable ground, and workers under 25 years of age still trying to carve out a foothold in the workforce.
Even more concerning would be changes to — or as some have proposed, the complete elimination of — the charitable tax deduction. If passed, the proposed tax reform framework would tax an additional 28 million people on their donations to charities.
While tax incentives aren’t the primary reason people give to churches, nonprofits, etc., the deductions have been proven to encourage people to give more. This is private-sector funding that’s combating poverty, promoting education and equipping people to help themselves while relying less on government services.
According to a study by Indiana University and Independent Sector, some provisions in the proposed framework would result in $13.1 billion less in charitable donations each year. This would damage the very fabric of the charitable sector, not to mention the impact on our communities.
These same studies, however, show that if tax reform were to be accompanied by an expansion in the charitable deduction, private-sector giving would increase between $4 billion and $8 billion. Thankfully there are legislative proposals that would expand the charitable tax benefit to all Americans for up to one-third of the amount of the standard deduction.
Again, we commend efforts under way to simplify our tax code and recognize that there’s no such thing as perfect legislation. But we strongly encourage our Congressional delegation to ensure that any tax reform bill provides a way for their Orange County constituents in all tax brackets to keep more of what they earn. This can be accomplished best by expanding the proof-positive benefits of both the Earned Income Tax Credit and the charitable tax deduction.
Sue Parks serves as the president and CEO of Orange County United Way, which is uniting the county in its fight for the education, health and financial stability of every person in Orange County.