University of Wisconsin-Milwaukee
Employment and Training Institute

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.

Families

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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