Earned Income Tax Credit Usage in Milwaukee County

Brief Summary

Usage of the Earned Income Tax Credit by Employed Families in Milwaukee County

by Lois M. Quinn, Employment and Training Institute, University of Wisconsin-Milwaukee, April 2000.

This report examines the usage of the earned income tax credit by Milwaukee County employed families, based on 1998 income tax returns filed with the Wisconsin Department of Revenue by single and married filers with dependents. It is part of a series of public policy studies on usage of worker benefits by Milwaukee County families.

State and federal earned income tax credits offer a substantial boost to working families at the lower end of the wage scale. In addition, to the federal earned income tax credit, Wisconsin has been a leader in providing a state credit. For those working family tax filers who claim the state credit, Wisconsin adds 4 percent to the federal credit for families with one qualifying child, adds 14 percent to the federal credit for families with two qualifying children, and adds 43 percent to the federal credit for families with three or more qualifying children. Together the federal and state credits total from $17 to $5,371, depending on the family size and income.

Findings

Federal and state earned income tax credits to working families in Milwaukee County totaled an estimated $128.9 million in 1998, up slightly from the $127.8 million claimed in 1997 and more than double the $49.5 million families received in 1993.
In 1998, 45,280 single parents and 6,801 married parent income tax filers with dependents claimed the EITC. Total claimants (52,081) were fewer than in 1997 when 53,513 families claimed the credit.
The EITC helped raise family earnings above the poverty level for an estimated 8,093 families in Milwaukee County.
A large number of Milwaukee County families eligible for the credit are not claiming it. Based on their income and family size, it is estimated that there were at least $27 million in unclaimed federal and state earned income tax credits for the 1998 tax year.
In 1998 claim rates dropped substantially for families earning between $5,000 - 14,999 a year. An estimated 84 percent of families in this income category claimed the credit, compared to 89 percent in 1997. Most of these families were eligible for $1,777 to $5,371 in total state and federal tax credits in 1998. The graph below shows changes in claim rates for this income group from 1994 to 1998.

The earned income tax credit is the most widely used benefit for low-income working families in Milwaukee County. The State of Wisconsin offers other generous benefits, including child care support, food stamps and medical assistance/BadgerCare. However, even in the central city Milwaukee neighborhoods with highest concentrations of eligible working families, these benefits are not currently accessed by most eligible working families and are used mainly by families still connected with the welfare system.
Single parent tax filers showed higher claim rates than married filers, with 87 percent of single parents with $5,000-14,999 in adjusted gross income claiming the credit, compared to only 62 percent of married filers in that income category.
The largest drops were seen in claims by tax filers with under $7,500 adjusted gross income. In 1997, 91 percent of these single parent filers claimed the EITC, while in 1998 the claim rate dropped to 86 percent. For married parent tax filers with under $7,500 AGI, in 1997 62 percent claimed the credit while in 1998 only 53 percent made credit claims.
The decline in claim rates for low-income employed families was seen in the county as a whole as well as in central city neighborhoods with large numbers of eligible families.
Families who have not claimed the federal or state earned income tax credit may file for prior years. Families can request help filing EITC claims from the Internal Revenue Service (1-800-829-1040) and the Wisconsin Department of Revenue (414-227-4000) and may request help filing for credits unclaimed in prior years. Employers can publicize the EITC at their workplace using kits available from the Center on Budget and Policy Priorities (202-408-1080). A number of community organizations and public libraries offer free tax preparation help from February through April 15th.

Table 1:

Percent of Single and Married Parent Filers with Dependents Who Claimed the Wisconsin Earned Income Tax Credit for 1998: Milwaukee County
Adjusted Gross Income	Single Parent Filers	Married Parent Filers
$1 - 4,999	86%	53%
$5,000 - 7,499	86%	53%
$7,500 - 9,999	87%	63%
$10,000 - 12,499	87%	63%
$12,500 - 14,999	88%	65%
$15,000 - 17,499	89%	65%
$17,500 - 19,999	87%	66%
$20,000 - 22,499	84%	69%
$22,500 - 24,999	81%	62%
$25,000 - 27,499*	55%	52%
$27,500 - 29,999*	27%	37%
Sub-total with AGI between $5,000 - 14,999#	87%	62%
Sub-total with AGI under $25,000	86%	63%
# In 1998 most of the families in this income category were eligible for $1,777 to $5,371 in total state and federal earned income tax credits. * In 1998 employed families were eligible for the credit if their income was less than $26,473 and they had one qualifying child or their income was less than $30,095 and they had two or more qualifying children.

Table 2:

Percent of Single Parent Tax Filers With Adjusted Gross Income Between $5,000-14,999 and with Dependents Who Claimed the Wisconsin EITC
	1993	1994	1995	1996	1997	1998
Milwaukee County	90%	88%	89%	90%	91%	87%
Selected Central City Zipcodes:
53204	82%	79%	81%	86%	87%	81%
53205	92%	88%	91%	93%	95%	91%
53206	93%	91%	92%	92%	94%	91%
53208	92%	91%	91%	92%	92%	89%
53210	94%	92%	93%	92%	94%	92%
53212	91%	91%	92%	92%	93%	89%
53216	93%	92%	92%	92%	93%	90%
53218	92%	92%	91%	92%	93%	90%
53233	91%	90%	83%	90%	88%	87%

Table 3:

Percent of Married Parent Tax Filers With Adjusted Gross Income Between $5,000-14,999 and With Dependents Who Claimed the Wisconsin EITC
	1993	1994	1995	1996	1997	1998
Milwaukee County	81%	70%	72%	71%	69%	62%
Selected Central City Zipcodes:
53204	86%	77%	76%	75%	71%	64%
53205	94%	83%	87%	88%	83%	90%
53206	89%	77%	86%	82%	82%	76%
53208	86%	82%	80%	81%	82%	78%
53210	91%	79%	77%	87%	79%	66%
53212	84%	82%	88%	81%	85%	69%
53216	83%	71%	80%	79%	72%	62%
53218	85%	82%	78%	76%	70%	68%
53233	85%	70%	82%	79%	61%	79%

Table 4:

Estimated Federal and State Earned Income Tax Credits Available to Wisconsin Workers for the 1998 Tax Year
1998 Household Income	EITC for workers not raising a child	EITC for workers raising 1 child	EITC for workers raising 2 children	EITC for workers raising 3 or more children
$1,000	$78	$363	$467	$586
$2,000	$155	$717	$923	$1,158
$3,000	$231	$1,070	$1,379	$1,730
$4,000	$308	$1,423	$1,835	$2,302
$5,000	$341	$1,777	$2,291	$2,874
$6,000	$306	$2,131	$2,747	$3,446
$7,000	$230	$2,362	$3,203	$4,018
$8,000	$153	$2,362	$3,659	$4,590
$9,000	$77	$2,362	$4,115	$5,162
$10,000		$2,362	$4,282	$5,371
$11,000		$2,362	$4,282	$5,371
$12,000		$2,362	$4,282	$5,371
$13,000		$2,235	$4,098	$5,141
$14,000		$2,069	$3,858	$4,839
$15,000		$1,902	$3,618	$4,539
$16,000		$1,737	$3,378	$4,237
$17,000		$1,570	$3,137	$3,935
$18,000		$1,404	$2,898	$3,635
$19,000		$1,238	$2,657	$3,333
$20,000		$1,071	$2,418	$3,033
$21,000		$906	$2,177	$2,731
$22,000		$739	$1,937	$2,429
$23,000		$573	$1,697	$2,129
$24,000		$407	$1,457	$1,827
$25,000		$240	$1,217	$1,527
$26,000		$75	$977	$1,225
$27,000			$736	$924
$28,000			$497	$623
$29,000			$256	$322
$30,000			$17	$21
Note: This is not a tax table. Filers should complete state and federal income tax forms to determine the exact amount of credit due. Workers may also be eligible for tax credits for 1996 and 1997 if they did not file tax forms or claim the credit for those years. State and federal credits are available to workers raising children. Only the federal credit is available to workers not raising children.

Funding support for this study was provided in part by the Helen Bader Foundation. For further information, contact the Employment and Training Institute, University of Wisconsin- Milwaukee, 161 W. Wisconsin Avenue, Suite 6000, Milwaukee, WI 53203. Phone (414) 227- 3388. Other worker benefit studies are available on usage of food stamps and medical assistance and access to child care subsidies for low-income families. The neighborhood indicators reports include analyses of the impact of the EITC credit in central city zipcode areas.

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Page updated 2009 Employment and Training Institute School of Continuing Education University of Wisconsin-Milwaukee Direct comments to: eti@uwm.edu

Page updated 2009
Employment and Training Institute
School of Continuing Education
University of Wisconsin-Milwaukee
Direct comments to: eti@uwm.edu