The Brookings Institution Center on Urban and Metropolitan Policy and the Progressive Policy Institute today released “The Price of Paying Taxes: How Tax Preparation and Refund Loan Fees Erode the Benefits of the EITC,” an analysis of the costs of tax preparation and “rapid refund” loans for low-income families in the nation’s 100 largest metropolitan areas.
Written by Alan Berube of the Brookings Urban Center and Anne Kim of the Progressive Policy Institute, the report finds that the proliferation of tax preparation services and products in low-income neighborhoods is undermining the effectiveness of the Earned Income Tax Credit (EITC), the nation’s largest program targeted to the working poor.
The report’s key findings are:
“The EITC is the federal government’s most successful anti-poverty program. Yet too many EITC dollars are rewarding tax preparers and affiliated lenders, instead of rewarding working families,” said Bruce Katz, director of the Brookings Urban Center. “Government must expand options to help make tax filing simpler and more affordable for low-income families.”
“The heavy premium low-income Americans pay for tax preparation services-and especially for “refund loans”-illuminates a larger problem: the lack of access to mainstream financial institutions,” explains Will Marshall, president of the Progressive Policy Institute. “This report documents one of the costs of this phenomenon and offers some sensible steps for ending the wealth stripping that’s all too common in poor communities.”
The Brookings Institution is a nonprofit organization devoted to independent research and policy solutions. Its mission is to conduct high-quality, independent research and, based on that research, to provide innovative, practical recommendations for policymakers and the public.