The $13.5M payoff that Maryland is missing

There’s an old aphorism in investment, “never leave money on the table.” It gets used a lot because there’s wisdom there. Business leaders often talk about leverage — the need to spend a little to get a lot more in return. That’s why, for example, 401(k) savers are often told by their financial advisers to put up enough money to get a company match, or why economic development agencies happily invest millions in infrastructure upgrades or tax breaks to attract potentially hundreds of millions in job growth and economic opportunity.

Now, imagine that there is just such a payoff hiding in plain sight. What if we pointed out that this particular deal not only had a highly attractive ratio of investment to reward (along the lines of 50-to-1) but the benefits would be targeted to some of Maryland’s (and especially Baltimore’s) most deserving recipients — people who are employed but live dangerously close to the poverty line? Your response should be this: What are we waiting for?

And we agree. What are we waiting for? The payoff in question is contained in the Earned Income Tax Credit or EITC. It’s the federal government’s subsidy for low-income workers but primarily for low- and moderate-income parents. It might be the nation’s least politically controversial safety net program because it encourages work. Qualified workers can receive cash payments in the thousands of dollars depending on their circumstances. If you don’t work, you can’t qualify for anything.

But here’s the catch. Workers have to file their tax returns to get a dime, and that’s proven to be a problem. The CASH Campaign of Maryland, the Baltimore-based nonprofit that provides free tax preparation for qualifying individuals statewide estimates that there is in the neighborhood of $50 million “on the table” — meaning left uncollected because EITC-eligible families aren’t filing their tax returns. That’s a lot of money for people earning somewhere in the neighborhood of the minimum wage.

Essentially, there are two remedies for this. First, let people know that this lucrative tax benefit is available, and secondly, provide them help in filing their returns. Both efforts cost some money whether in outreach campaigns like TV and newspaper ads and leaflets or in accounting manpower (in addition to the many volunteers who help the CASH Campaign and others with this chore). So we asked the experts: What would it cost to make a significant dent in this uncollected bonanza?

Here’s their calculation — a conservative one — based on recent experiences, IRS data and the thousands of returns they help fill out each year: If Maryland put up about $250,000 (and took other steps like instructing state and local social workers to more aggressively promote free tax assistance among their low-income clients), the CASH Campaign would likely reap about $13.5 million each year in EITC payments for filers. That’s an enormous payoff for such a modest investment.

It’s also one with little to no downside. Spend billions of dollars in taxpayer dollars to attract Amazon’s HQ2, and it’s possible you may suffer buyer’s remorse but be stuck with a questionable and costly deal. Put up a quarter million annually to leverage $13.5 million, and if it doesn’t work out, stop spending the quarter million. That makes this hardly a gamble at all for Annapolis. An outreach effort could easily be evaluated after one or two years to see if it works. If it doesn’t, stop doing it.

Let us also join in the crusade. Know someone who might be eligible for tax assistance? Have that person visit the CASH Campaign’s web site at or call 410-234-8008 to set up an appointment beginning on Jan. 3. The Earned Income Tax Credit may be a great concept, but its downside has always been that it puts too much burden on its beneficiaries. With a little financial assistance (and private donations are welcome, by the way), the CASH Campaign can help bridge this gap and take that money off the table. That’s not only good news for families who need the help, it’s good for the state’s economy generally as you can bet that qualifying families will spend that newfound money on such necessities as diapers or food or clothing at the nearest store.

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