Community Action: Risking the Economic Tide in Phoenix

Like communities all across the United States, making ends meet is an ongoing challenge for families trying to stretch their income in Phoenix, Arizona.  The gap between prevailing wages for many jobs and the ability to meet basic monthly living expenses is readily seen using the Living Wage Calculator available through the MIT.1

 

The City of Phoenix Human Services Department (HSD), serving as the designated Community Action Agency for Phoenix, incorporates data from the Living Wage Calculator in its 2013 Community Assessment.2  This readily demonstrates the level of income required to meet the local cost-of-living, while accounting for differences in family composition.  Without exception, this reflects that much higher income is needed than that obtained through low-paying jobs.

 

In response, HSD has marshaled tremendous community involvement to help area residents put more money in their pockets every year.  This is accomplished by assisting with filing for Earned Income Tax Credit (EITC) refunds.  EITC is a refundable federal income tax credit for low-income working individuals and families.3

 

Over the past ten years, a citywide Earned Income Tax Credit (EITC) Campaign has enabled more than 43,000 low- and moderate-income families to receive more than $53 million in federal refunds at Free Tax Preparation Sites across Phoenix!

 

EITC refunds make an immediate difference on the ability of a family to cover essential costs such as food and housing, along with child care and transportation to get to work.  At the same time, the entire community feels the effect as “economists suggest that every increased dollar received by low- to moderate-income families has a multiplier effect of 1.5 to 2 times the original amount, in terms of its impact on the local economy and how much money is spent in and around the communities where these families live.”4  This amounts to $11-$15 million added to the Phoenix economy in the past year alone based on $7.3 million in refunds!

 

The Challenge of Making Ends Meet5

The annual median income of Phoenix is $48,823.  Yet, more than 275,000 Phoenix residents or 19.1 percent of the City’s population live in poverty.6  Alarmingly, households earning less than $15,000 annually represent 13.2 percent of all Phoenix households.  And in some sectors of the City, these very low-income households comprise more than 40 percent of the total!

 

HSD’s 2013 Community Assessment provides two glimpses of the struggles facing lower-income families:

 

  • MIT’s Living Wage Calculator offers illustrations of wages needed to meet the cost-of-living of families with children in Phoenix ranging from $37,814 (2 adults, 1 child) to $70,138 (1 adult, 3 children)
  • 2011 HUD data on hourly wages necessary to afford fair market rents in Phoenix based on using 30% of gross income standard: 2-bedroom = $18.00/hour; 3-bedroom = $26.21/hour

 

Clearly, it’s a losing equation for a family at poverty level or earning near the minimum wage of $7.25 per hour which totals approximately $15,000 per year IF it’s a full-time job.

 

According to the IRS, the average EITC refund last year in Arizona was $2,398.7 Receiving this amount is the equivalent of nearly a 16 percent pay increase for someone earning $15,000 a year.   Most importantly, it serves as a real boost to meet immediate important needs and can even help get started with some savings.

 

Believing in Partnerships – A National Community Action Goal

HSD takes to heart the importance of building community partnerships, which is one of six broad national anti-poverty goals established for the Community Action Network.8  The EITC Initiative is an entirely volunteer-driven project who are trained and certified through the Internal Revenue Service.  Every year millions of dollars in tax refunds go unclaimed because people are unaware of the various credits available to them such as the EITC, child care tax credit, and education tax credit.  The Volunteer Income Tax Assistance Program or VITA is designed to change this by providing the maximum benefits available to the taxpayer and giving them guidance to lessen their financial burden.

 

Nineteen primary VITA Sites, located in Phoenix, are open from January to April. Additionally, HSD provides free tax assistance for back taxes (up to four years) at three sites from May through July, generating additional income for low income families.

 

During the past three tax seasons alone, HSD VITA sites prepared over 15,000 returns generating over $24 million in tax refunds.  This was made possible by 847 volunteers who contributed over 34,800 hours and generated over $731,388 of in-kind.  HSD provides only one full-time paid staff that oversees the sites, assists with volunteer recruitment, coordinates trainings and works closely with the IRS and partner agencies to ensure sites are in compliance with IRS regulations.

 

VITA Sites are most commonly set up in churches, community centers, colleges, and other easily accessible locations.  HSD is also a member of the Maricopa VITA Network Coalition which includes other Phoenix metropolitan area cities, AARP and two Valley of the Sun United Way offices.  This network shares information and resources and support each other in a variety of ways that stretches their resources and increases their capacity.

 

Picking Up the Ball

EITC outreach and volunteer tax assistance services are central to the efforts of many community action agencies (CAAs) with both state-level and local activities such as:

 

Examples of State Community Action Association Initiatives

 

Virginia CASH Campaign – The Virginia Community Action Partnership’s Earned Income Tax Credit (EITC) Initiative, launched in 2003, supports community groups and local coalitions to promote the EITC through the Virginia CASH Campaign. CASH stands for Creating Assets, Savings and Hope.  1,200 volunteers worked through 27 coalitions during the 2012 tax season resulting in almost $11.5 million in EITC refunds by helping over 7,500 taxpayers claim the EITC.  Also, $4.8 million was saved in tax preparation fees.

 

Earn It. Keep It. $ave It. – The Community Action Partnership of Utah has led this effort since 2006.  A total of 727 volunteers donated 27,258 hours working through eight local coalitions during the 2012 tax season resulting in just under $8.8 million in EITC refunds for 5,298 taxpayers.

 

Examples of Local Community Action Agency Initiatives

 

Milwaukee Asset Building Campaign (MABC) – The Social Development Commission (WI) is the lead agency for MABC, which has returned more than $132 million to low-income families over the last eleven years.

 

Earned Income Tax Credit Program – The Community Action Partnership of Riverside County (CA) brought over $8 million in tax refunds to the county in 2010-2011.

 

EITC and VITA campaigns through CAAs put millions of dollars back in the pockets of low-wage earners every year.  And, at the same time, give local economies a much needed boost!

 

Information Sources

1 Living Wage Calculator, Massachusetts Institute of Technology.

2 2013 Community Assessment, City of Phoenix Human Services Department, p. 26.

3 2013 EITC Brochure, Arizona Assets Alliance – Spanish version

4 Dollar Wi$e Best Practices: Earned Income Tax Program, The United States Conference of Mayors, 2008, p. 2.

5 Unless noted otherwise, data in this section is drawn from 2013 Community Assessment, City of Phoenix Human Services Department.

6 For example, the 2013 poverty threshold for a family of 4 is $23,550; see Annual Update of the HHS Poverty Guidelines, U.S. Department of Health and Human Services, January 24, 2013.

7 EITC Statistics, United States Department of the Treasury, Internal Revenue Service.

 

8 Goal 4 is “Partnerships among supporters and providers of service to low-income people are achieved.” Results Oriented Management and Accountability, National Association for Community Services Programs

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This website was created by NASCSP in the performance of the US Department of Health and Human Services, Administration for Children and Families, Office of Community Services Grant Number 90ET0431 and the Community Action Partnership in the performance of the US Department of Health and Human Services, Administration for Children and Families, Office of Community Services Grant Number 90ET0428.

Any opinion, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the US DHHS, ACF.