Poor taxpayer now can earn a cash refund; Money: Maryland for the first time is offering a tax credit that actually puts cash in the pockets of poor workers. But 140,000 may not know about it; Md. tax credit


Paying no Maryland income tax is nice, but having the state pay you is even nicer.

For the first time, nearly 330,000 low-income taxpayers who qualify for the earned income tax credit can receive a refund from the state. In previous years, the credit could only be used to lower or wipe out state taxes owed.

Marylanders cannot receive more than a $376 refund from the state -- according to a formula to calculate the earned income tax credit -- but for workers like Hope Lee and Amy Hillen, every little bit helps, they said.

"It's not much, but it all goes into the pot to help me pay bills and make ends meet," said Lee, director of the Faith Creative Day Care Center in Northeast Baltimore. She's a single mother of two sons, age 8 and 15.

"I'll never make a lot of money in child care, so I'm grateful," she said.

But there is a problem, said Marvin A. Bond, assistant state comptroller.

Of the 330,000 Marylanders who typically claim the federal earned income credit, only 190,000 of them also claim the state credit.

That means at least 140,000 Maryland taxpayers who qualify for the state credit may not know about the new benefit, he said.

The earned income credit is a tax credit for employed people whose gross annual salary doesn't exceed $26,473 for families with one child, or $30,095 for families with more than one child. The children must be younger than 19 or, if they are full-time students, younger than 24. Those with no children can make no more than $10,030.

Before the 1998 tax year, the state used a formula that considered family size, income and other factors to give low-wage families a credit that reduced or eliminated their state tax bill. But unlike the federal government, if the credit was greater than taxes owed, the state did not send them a check.

"The earned income credit is not famous. People don't think about it or know about it, but it's of huge importance to the financial stability of working families," said Jennifer Williams, coordinator of the Earned Income Credit Campaign, a grass-roots effort organized by the nonprofit

Maryland Committee for Children.

"This tax provision acknowledges people work hard but do not earn a living wage," she said. "It's a family-friendly law and an important change that provides support to our least affluent citizens in Maryland."

The campaign and other advocates for the poor have sought the change to the state tax code for more than a decade.

A booming economy that cushioned the state's revenue boosted the tax credit campaign, said Bond, the assistant comptroller.

"The legislature knew surplus money was going to materialize, so the members took the existing EIC and made it resemble the federal EIC," he said. A budget of $115 million has been set aside for the 1998 earned income credit, Bond said.

The maximum refund allowed under the federal earned income credit is $3,756.

To help get the word out, the tax credit campaign has distributed posters, advertised on public buses and urged employers to include fliers in paychecks.

Hope Lee, of the day care center, hands out fliers to parents who come to drop off and pick up their children.

"Having to pay no taxes is a benefit in itself, but a refund is an extra little push to keep people moving in the right direction," said Amy Hillen, a low-wage worker in the Howard County Auditor's Office.

The single mother of a son and daughter, age 5 and 10, respectively, Hillen has completed her 1998 tax forms and is expecting a $125 refund from the state earned income credit. "It's a lot of money when you're trying to make it from paycheck to paycheck," she said.

Pub Date: 2/06/99

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