A ten-year study of earned income tax credit utilization in western South Dakota:

Where you live matters

By:

Liz Diers

Earned Income Tax Credit

(Line 64)

2013 Earned Income Credit $$$

Literature Review

• Siegel & Alwang, 1999: “the living conditions of the poor limit the range of choices available to them”

• Mendenhall, 2006: EITC chronology

• The Brookings Institution• Berube, 2007• Holt, 2011• Kneebone, 2010

• Smith and DeBord, 2005: education and poverty

• Caputo, 2010: EITC under-utilization and education

Research Questions

1. Is there an equitable distribution of EITC utilization across geographic regions or is there a difference based on where taxpayers live (metropolitan vs. rural vs. Indian reservation)?

2. Is there a connection between what is being taught at different higher education institutions and utilization of the EITC in that geographic region?

3. How did the taxpayers, who have claimed EITC for multiple years, find out about this credit?

South Dakota

Mixed-methods study

– Quantitative• 10 years of tax data for western SD taxpayers• Grouped by county into 6 regions (metro, rural, each reservation)• Graphed and re-grouped data into 3 regions• Statistically analyzed

– Qualitative• Evaluated Accounting Programs at Higher Education Institutions • Interviews

How Much Money?

$263,842,467

$32,484,082

$77,997,070

EITC for 1999-2008 = $374,323,619

Metro/RuralCheyenne River/Standing RockPine Ridge/Rosebud

$32,365,523

$3,760,269

$8,811,363

2008 Eitc $44,937,155

Metro/RuralCheyenne River/Standing RockPine Ridge/Rosebud

20082007200620052004200320022001200019990%

10%

20%

30%

40%

50%

60%

70%

Percentage of Tax Returns Claiming EITC

Rosebud

Pine Ridge

Cheyenne River

Standing Rock

Rural

Metro

Perc

enta

ge

Percentage of Tax Returns Claiming EITC

1999 2000 2001 2002 2003 2004 2005 2006 2007 20080%

10%

20%

30%

40%

50%

60%

70%

Pine Ridge/RosebudCheyenne River/Standing RockMetro/Rural

3 Groups – Average EITC %

2008200720062005200420032002200120001999$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

Average EITC Claim Amounts per region

RosebudPine RidgeCheyenne RiverStanding RockRural Metro

Average EITC Claim Amounts per region 3 Groups – Average EITC $

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

Pine Ridge/RosebudCheyenne River/Standing RockMetro/Rural

Higher Education Institutions and Interviews

• Accounting Programs at Higher Education Institutions – 1 public, 1 private, 2 tribal colleges– Interviewed accounting professors and analyzed curricula

• Interviews– Taxpayers – IRS employees– VITA site coordinators

Higher Education Institution Locations

Interview Highlights

• Importance of VITA (Volunteer Income Tax Assistance)

• Word of Mouth

• “Christmas in January”

• Used Car business - best time of year

• Abusive Paid Preparer Practices

THANK YOU FOR YOUR TIME