Ron Klink: Protecting the earned income tax credit for families

Over 81% of Pennsylvanians receive the earned income tax credit, the federal government’s refundable tax credit to low and moderate-income families. This tax credit saves our state $2 billion annually — an average of $1,874 per household. Unfortunately, the IRS is now taking action that can jeopardize this windfall tax savings for thousands of Pennsylvanians.

The IRS already collects Pennsylvania’s taxes and audits them for compliance. Now, it wants to prepare and file their tax returns too.

When the MITRE Corporation, the nonprofit that heavily collaborates with the federal government, analyzed the IRS’s plans and surveyed the public on the idea, it found that few Americans wanted the IRS to prepare their taxes unless perhaps it could also prepare state and more complicated federal returns at the same time.

One can’t blame them. According to the Progressive Policy Institute, “the IRS does not have the necessary information in its databases to accurately determine a low-income taxpayer’s eligibility for EITC and/or correctly calculate the amount of credit due to the taxpayer.” That’s because “the EITC is based on a stew of residency, family relationship and income limits, with complex tie breaker rules. And like a giant puzzle, it requires deep knowledge of the personal lives of people living in the same household or family unit, with who else, for how long and what their relationships and incomes are, just for a start.”

The EITC is one of the most critical anti-poverty programs in the country. Too many Pennsylvanians to count have told me that this credit and this credit alone got them back on their feet and able to put food on the table for their loved ones. If an IRS tax preparation and filing service will struggle to assess many families who qualify, it won’t provide utility to the people of this state.

Rather than respect MITRE’s findings, the IRS commissioned a think tank with a long-publicized bias in favor of an IRS filing program to conduct a new study, which unsurprisingly showed broad public support for idea. Then, after receiving this cover, the IRS released a pilot program called Direct File to begin preparing and filing our taxes anyway.

The problem? This IRS-commissioned study wasn’t evenhanded — not by a long shot — and an October report from the Department of Treasury’s inspector general proves it.

The inspector general found that not only did the study utilize a faulty construct, which likely overinflated the public’s support for Direct File, but that the IRS also could not provide the inspector general “with any supporting documentation to support its cost estimates or how it determined there would be at least 5 million (Direct File) users.”

In a statement to Real Clear Policy, former Pennsylvanian Democratic congressman Jason Altmire said, “The fact that a December 2022 study from MITRE Corp, the independent entity which operates the Treasury Department’s federally funded research-and-development center, found very little public appetite for Direct File, tells us everything we need to know about the IRS’s intentions here. Apparently, it didn’t like the results of this study, so it created a manufactured one that came to its desired conclusion.”

Indeed.

Pennsylvania’s congressional delegation shouldn’t stand for this. Every one of our representatives committed to defend Main Street’s interests, so it’s incumbent on them to get more answers on Direct File and ensure that the IRS remains accountable to the public and the people’s branch of government. The EITC is too important to Pennsylvania to be thrown away so carelessly.

Ron Klink is a former Democratic member of Congress from Pennsylvania.