Cuyahoga EITC Coalition Evaluation, 2015 Amanda Woodrum, Lucki Ratsavong, and Marcia Brown

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1 Basic Needs September 2015 Cuyahoga EITC Coalition Evaluation, 2015 Amanda Woodrum, Lucki Ratsavong, and Marcia Brown Executive Summary The Cuyahoga Earned Income Tax Credit Coalition, led by Enterprise Community Partners in conjunction with over 40 partners, provides free, high-quality tax preparation services for low- to moderate-income families in Cuyahoga County. During the 2015 tax season, the Coalition served nearly 14,000 clients and brought in almost $19 million in federal and state tax refunds for county residents. 1 Data collected at 17 of the Coalition s tax sites shows the Coalition serves a relatively diverse, older and low-income clientele. Of the clients for which aggregate data was provided, 69 percent were African-American, the average age was 48, and the average income was $21,497, a number well below the poverty line for a family of four. According to a survey of clients distributed at ten Volunteer Income Tax Assistance (VITA) sites, nearly one in three Coalition clients receive food assistance. Key findings The Cuyahoga EITC Coalition brought $18.9 million in federal and state refunds to the local community, much of which went to low-income families. 35 percent of coalition clients qualified for $7 million in Earned Income Tax Credits (EITC), a program designed to help lift working families out of poverty. Tax refunds help clients pay utility bills, rent, buy groceries, pay debt, and increase savings. The state of Ohio s EITC should be increased and made refundable. Roughly 35 percent of all Coalition clients qualified for the Earned Income Tax Credit (EITC), a tax program designed to provide financial assistance to low- and moderate-income families. Qualifying households earned an average tax refund of more than $1,600, an amount roughly equivalent to a month and a half of their median family income. 2 According to the survey, clients top five priorities for tax refund use were utility bills (41 percent), paying down debt (31 percent), housing (29 percent), savings (26 percent), and groceries (25 percent). A second client satisfaction survey indicated nearly all respondents were pleased with the tax services they received from the EITC coalition (97 percent). I am very grateful for this free service, commented one survey respondent. Clients are telling their friends and family about the services as well. According to survey results, 67 percent of clients learned about coalition services when a family member or friend referred them. 1 The EITC coalition filed 13,741 returns. 2 Brookings Institute EITC Interactive and Resources

2 Year-to-Year Comparison The EITC Coalition filed 13,741 tax returns in 2015, more than in any previous year and 14 percent more than in In addition, more clients qualified for the earned income tax credit in In all, 4,075 clients qualified for the EITC in 2015, up from 3,948 the prior year. As a result, the Coalition brought roughly $1 million more in such credits to low and moderate-income members of community in 2015 than in 2014 ($6.5 million in 2015 versus $5.5 million in 2014). A Detailed Look at 17 Coalition Sites Seventeen EITC coalition sites are equipped with software capable of assembling more detailed data than tax sites not so equipped, including comprehensive demographic information and federal refund information. The data is compiled anonymously and clients are permitted to opt out of the data collection. For the 7,247 clients who had their taxes done at one of these software-enabled sites: The average adjusted gross income was $21,497. The average federal refund was $1, percent of respondents were African American. 3 A majority, 59 percent, were women; The average client age was 48; and, About 12.5 percent of respondents had someone in their household with a disability. A little less than half of these 7,247 clients, 45 percent, qualified for the earned income tax credit. The average EITC was $1,623, and credits for all 3,247 EITC recipients totaled more than $5.2 million. EITC recipients were younger than coalition clients on the whole, more likely to be African American or female, and more likely to have a member of their household with a disability. Of course all EITC clients were employed, a requirement of the program. Figure 1 shows most clients at these 17 sites were from zip codes encompassing the City of Cleveland. The most common zip code was 44105, which is primarily (77 percent) in the City of Cleveland but also includes portions of Garfield Heights, Cuyahoga Heights, and Newburgh Heights. Figure 1 Top 5 Zip Codes for EITC Recipients EITC Recipients Cleveland, Garfield Heights, Cuyahoga Heights, Newburgh Heights Cleveland, Brooklyn Shaker Heights, Cleveland Cleveland Cleveland 3 Of the 7,247 clients tracked through this software, 4,438 identified their race, 5,153 identified their gender, and 5,106 answered the question about disabilities in their household. 2

3 Client Survey Results Ten Volunteer Income Tax Assistance (VITA) sites distributed two surveys: the Cuyahoga County Tax Survey, meant to better understand the financial situation of clients, and the Client Satisfaction Survey, meant to assess the coalition s marketing strategies. Clients were not required to participate. Of clients served, 2,282 clients voluntary participated. Living Situation. Figure 2 shows 60 percent of respondents rent homes, 26 percent own. Figure 2 Home Ownership, 2,257 respondents Reported in 2015 Client Response 2015 (%) Client Response 2014 (%) Client Response 2013 (%) Rent 1, Own home with mortgage Own home without mortgage Live with family or friends Dorm or group setting Source: Policy Matters analysis of data provided by the survey administered to EITC Coalition tax prep site clients. Results are all self-reported. Previous years numbers are from prior year surveys. Safety Net Services: Figure 3 shows what, if any, safety net services clients receive. Respondents could indicate more than one service. The majority of clients reported receiving no other form of assistance. Almost none of the respondents received cash assistance, unemployment compensation, childcare assistance or housing vouchers. The most common additional aid clients received was food aid followed by Medicaid. Nearly one in three households reported receiving food assistance and less than one in four received Medicaid or other health assistance. Figure 3 Roughly 1/3 of client households receive some form of food assistance

4 Using refund: As Figure 4 shows, most clients indicated they would use their refunds for living expenses. Utility bills topped the list, followed by a number of other essentials such as debt, housing, savings, groceries and car repair. Clients could choose more than one area. For the 15 percent of clients who marked other, plans ranged from buying a new laptop to covering medical expenses Figure 4 Clients will use refunds for utilities, debt payment, housing or savings Why are you getting your taxes done here? Figure 5 below indicates the cost-free nature of the tax preparation service is a major motivating factor for using the EITC Coalition services. Figure 5 Many clients used the Coalition for tax preparation because it is free Other It's near where I live. Quality of service Friend suggested it I came here last year. It's free

5 Where did you hear about this tax site? Almost half of survey respondents indicated they were referred by a family member or friend to the tax site (45 percent). Nearly 20 percent listed in the other box they heard about it from 2-1-1, First Call For Help, a United Way call center that schedules appointments at tax prep sites (among other services). Additional sources included: Radio (7.2 percent); IRS (5.8 percent); County office (4.4 percent); and Newspaper (2.5 percent). Relatively few came in response to an RTA bus ad or learned about the site at school. In the other section, a number of clients also indicated they learned about the service from the library, Cleveland Housing Network, Asian Services in Action, or the Internet. How did you have your taxes done last year? Figure 6 shows 43 percent of clients had their taxes done at the same site the previous year, 21 percent at another free tax site. Figure 6 Most clients had taxes done at same location or another free tax site last year Didn't Jile last year Paid 15% preparer 9% Family or friends 8% Did my own 4% Here 43% Another free tax site 21% Client Satisfaction Survey More than 1,300 clients took a voluntary 6-question client satisfaction survey (1,343). Respondents were not required to answer every question. 1. Nearly all respondents rated their overall experience as good or excellent (97 percent). 2. Nearly all also thought the process of making an appointment through First Call for Help was excellent or good (96 percent). 3. Only 2 percent of respondents felt they did not know what to bring to the appointment. 4. The vast majority of clients, 86 percent, waited less than 30 minutes for their appointment. Nine percent waited between 30 minutes and an hour while five percent waited more than an hour. 5. Almost everyone, 98 percent, thought his or her tax preparer was good or excellent. 6. Nearly 300 clients made additional comments in the open-ended dialogue box in question six. Many were thankful for the service. Several indicated they planned to return the following year and would recommend the service to others. A number of comments noted the volunteers were professional, patient, nice, informative, efficient and very helpful. A few indicated the location was clean, quiet, and nearby. A handful of comments indicated walk-ins could be handled more efficiently, the invitation they received did not inform them they needed to make an appointment, the wait was too long, or that there were not enough seats to accommodate everyone. Figure 9 below lists some of the quotes that were fairly representative of all the responses. 5

6 Figure 9 Selected comments from client satisfaction survey I love coming here every year. Clean, quiet, delightful experience! Great resource for the community. I wish I would of known of this service before. Thank you. I will tell others because I had such a great experience. This is a blessing to me. My preparer was very polite, patient, and thorough. She had answers for any questions that I asked. I would recommend this service to everyone! Very nice, professional, courteous and informative thanks see you next year!! She got me in and out! [T]he volunteers were very patient, informative, and pleasant. There was no wait time. I had a very good experience. I may even think of volunteering. Thank you for your services. It helps me and others who can t afford it. Very nice, it s my first time filing by myself. I appreciate the free service. It takes a load off me. I would recommend this site to any of my family members. Good people doing good work. I enjoyed my time getting my taxes done. It was easy to make an appointment through Thank you. I appreciate the time and effort afforded me with my tax preparation. CHN provides a much-needed service for senior citizens as well as others. [T]he card I received in the mail didn t say call for appointment. But now I know to call so I don t sit all day. Please treat walk-ins better. May god bless who ever thought of this, and all the people helping to make this place such a success year to year. I love filing my taxes here. Thankful for opportunity to save through saving bonds. I am very grateful for this free service. This is the 5 th year I have used this service. Keep going for people who need you. We are out there struggling for our families. In my opinion, the service is wonderful and convenient. The reps here are very nice and most importantly the service is free. With inflation being so high and everything cost so much it is nice not to have to pay for getting your taxes done. So, Thank you. Very happy this year I had an appointment. If I didn t have this office I would not be able to have my taxes completed. Bless you all for your time. I feel like I was treated fairly, respected by all staff and appreciated the time and attention I was given to complete my taxes. Please keep funding it. It was one less thing to worry about paying. 6

7 Policy Perspective Federal. Right now, there is an opportunity for policy action at the federal level that will make permanent excellent changes to the federal Earned Income Tax Credit and the federal Child Tax Credit. Making these changes permanent will maintain tax credits that assist nearly one million Ohio households, reduce poverty, raise academic achievement for children, improve long-term economic outcomes, and help parents work. If the changes are allowed to expire, at the end of 2017, more than 407,000 Ohio families and more than 778,000 Ohio children will experience lost of household income. 4 Senator Rob Portman, Senator Sherrod Brown, and Ohio members of the U.S. Congress have the opportunity to make these changes permanent, bringing hundreds of millions of federal dollars into Ohio and costing Ohio employers nothing. State of Ohio. In 2014, Ohio established a state-level Earned Income Tax Credit that piggybacks on the federal EITC and amounts to roughly 10 percent of the federal credit. Both the federal and state earned income tax credits help low-wage workers make ends meet and reduce poverty. They also have a substantial economic impact on the community. The average federal refund for Coalition clients amounted to more than a month and half of pay for a majority of clients. Families use these refunds to purchase goods and services in the community. Research suggests that every dollar received by low- and moderate-income families multiplies in its impact on the local economy 1.5 to two times. 5 The adoption of Ohio s EITC is good news for Ohio s families, communities and economy. However, due to certain limitations, Ohio s EITC is not as effective at lifting families out of poverty as the federal EITC or the EITCs in other states. The Ohio EITC, unlike the federal credit, is not refundable. This means that the client cannot receive a refund that is larger than what she or he paid in taxes. Of the 28 states with EITC programs coordinated with the federal program, Ohio s is one of only four that is nonrefundable. 6 Ohio s credit is 10 percent of the federal EITC while the average state has a 16 percent credit and many have one higher than that. 7 Our federal policymakers should: Make the expansions to the EITC and Child Tax Credit permanent. This will keep children and families out of poverty, help parents work, and bring federal dollars into Ohio. The state of Ohio should: 1. Raise the state EITC from 10 to 20 percent of the federal EITC. Ohio was successful in raising the state EITC from five to ten percent in 2013, but 20 percent is a more helpful level. Doubling the credit will provide numerous benefits to Ohioans: help families pay for essentials, support work, improve financial security, bring money into Ohio communities, and reduce poverty. 2. Make the state EITC fully refundable. Refundability is key to EITC success. Low- and middleincome families pay a larger share of their income in state and local taxes than wealthier families, even if they earn to little to pay income tax. Making the EITC refundable will help address this disparity, while supporting working families and reducing poverty. 4 Center on Budget and Policy Priorities, Ohio Fact Sheet: Tax Credits Promote Work and Fight Poverty at 5 The Earned Income Tax Credit: Good for Our Families, Communities and Economy, The National Community Tax Coalition (January 2012). 6 Rewarding Work Through State Earned Income Tax Credits. Institute on Taxation and Economic Policy, April A Credit that Counts. Policy Matters Ohio: 17 Oct

8 3. Eliminate the cap. Ohio is the only state with a cap on eligibility for its EITC program. The cap limits the fullest potential of Ohio s EITC tax program. Removing the cap on income over $20,000 will allow more low- and middle-income families to take full advantage of the credit that incentivizes work and improves the lives of beneficiaries. Recommendations for the EITC Coalition 1. Improve process for handling walk-ins versus those with appointments. The vast majority of survey comments were overwhelmingly positive. However, there was a small subsection of comments related to appointments, walk-ins and wait times. We recommend partners make very clear on flyers and other materials that while walk-ins are welcome, clients are strongly encouraged to make appointments through United Way or they may experience a wait. There should be a clear process for handling walk-ins at each site. For instance, at expected busy times, it may be worthwhile to designate someone specifically to handle walk-ins. 2. Make slight modifications to client surveys. See Appendix for suggested revisions. 3. Help ensure all tax prep sites have the technology and capacity to capture aggregate client data. This will enable a more sophisticated client analysis for all clients served and help the Coalition understand how these tax sites and the EITC Coalition serve clients and benefit the community. 8

9 Appendix Suggested Revisions to the 2015 Cuyahoga County Tax Survey Below we suggest revisions to the surveys which we believe will give a more comprehensive understanding of how the Coalition can best serve clients and how to improve the lives of the recipients. Our changes are italicized. Q1: Gender(s) Male Female Married Couple Other Q2: Race/Ethnicity African American/Black Asian Middle Eastern American Indian Hispanic/Latino White Other (please specify) Q6: Where did you first hear about this tax site? Eliminate RTA Bus Ad and School as an answer choice Add Internet as an answer choice. Add Add Library 9

10 Authors Amanda Woodrum is a researcher for Policy Matters Ohio, covering issues ranging from energy, poverty and sustainable development. Marcia Brown, a 2015 summer research intern at Policy Matters Ohio, is now a freshman at Princeton University, where she plans to major in the Woodrow Wilson School of Public and International Affairs. Lucki Ratsavong, a 2015 summer research intern at Policy Matters Ohio, is now a senior at The Ohio State University, where he studies Political Science and Global Public Health. Acknowledgements We are grateful to Enterprise Community Partners for funding this report. The Wean Foundation, the Cleveland Foundation, and the Ohio Benefit Bank provide generous funding to the Ohio CASH coalition. As always, any errors are the sole responsibility of the authors. A special thanks to our fellow interns Connor Lang, Spencer Murray, Andrew Slivka, Nate Steinberg, and Sophia Zupanc for contributing data coordination and data entry. We also would like to thank Policy Matters Ohio staffers for their assistance in editing the report. Policy Matters Ohio is a non-profit, non-partisan research institute researching how to make Ohio s economy work for all. Generous funding comes from the Cleveland, Ford, George Gund, Sisters of Charity, St. Luke s, and Raymond John Wean foundations, as well as the Center on Budget and Policy Priorities, Greater Cleveland Community Shares and the Economic Policy Institute. To those who want a more prosperous, equitable, sustainable, and inclusive Ohio Policy Matters Perkins Avenue, Suite 4C-E Cleveland, Ohio East Broad Street, Fourth Floor Columbus, Ohio Policy Matters Ohio. Permission to reproduce this report is granted provided that credit is given to Policy Matters Ohio. All rights reserved. 10