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Honda: Helpful Tax Programs Can Boost Economy

As Benjamin Franklin once wrote, “In this world nothing can be said to be certain, except death and taxes.” While we aren’t able to stave off death, there is something vital we can do to help low-income Americans with their taxes.

That’s why Sen. Sherrod Brown (D-Ohio) and I have introduced the VITA Act of 2011. This legislation would permanently authorize the Community Volunteer Income Tax Assistance Matching Grant Program.

The program provides trained tax-preparers to underserved communities to help Americans properly prepare their taxes and file for crucial money-saving tax credits. Congress must pass the VITA Act of 2011 to permanently fund this critical program that saves money for taxpayers and the federal government.

You read that correctly — VITA actually saves the government money. VITA programs help reduce error rates and processing costs, thereby saving the IRS $1.8 billion a year. Tax compliance rates rise because most VITA beneficiaries are filing their taxes for the first time. At a time when important federal programs are being slashed, saving VITA should be a no-brainer — we make money in the deal.

VITA also boosts the economy and increases the return on investment for communities. By putting money back in the wallets of low-income people, VITA enables them to increase spending on essentials in their community, thereby  increasing their spending on education, mortgages and other investments. For many, this encounter with financial services is a gateway to building individual assets, such as savings accounts and college tuition funds.

In general, VITA is a crucial program for serving low-income communities and helping eradicate poverty. By lifting Americans out of the clutches of poverty, we can in turn increase the nation’s economic productivity and, therefore, our gross domestic product. President Ronald Reagan understood this concept of rejuvenating the economy by reducing poverty, and came up with a way to do it — incentivizing work over welfare by taking the country’s poorest off the tax rolls. The result came in the 1986 bipartisan reform with the expansion of the earned income tax credit, the largest public assistance program our country has today.

The EITC is an extremely successful program that lifts 4 million people out of poverty each year. Studies show that every dollar of EITC refunds translates to $1.58 in local economic activity. Unfortunately, low-income workers, the elderly, people with disabilities and those who lack a thorough grasp of English are less likely to claim the credit.

Many of them are not well-informed about the tax filing process or able to pay for tax assistance services. While we may have created a tax credit to support the people who need it most, if it goes unclaimed, it’s worthless. This is where VITA comes into play.

VITA transforms the EITC and other tax credits from policy into reality for thousands of needy families. In 2009, community VITA programs prepared more than 1.2 million tax returns, including 400,000 EITCs, resulting in $887 million of refundable tax credits for their clients.

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