VITA stands for “Volunteer Income Tax Assistance.” There are additional specialized programs like it. The key to success of the new tax reform law is to have these programs used. Why?
For folks like me, the cut in my taxes means I will have a few thousand more dollars to save or invest. It is highly unlikely that my spending patterns will materially change. The same is true for many Cumberland clients that I have polled. As a group we are in the upper decile of income and wealth. We like lower taxes, of course. But the relative impact on our household spending habits is muted. Remember, please, that I’m talking about individual taxes and not corporate taxes.
But what about those households whose incomes are in the low or mid five figures? These households have a large percentage change in disposable personal income from the extended and enlarged standard deduction and the special tax credits directed at children. In many cases throughout the United States, the average income gain in those households is about $2000, and that is an annual and permanent shift upward of that household’s spendable personal after-tax income.
The first issue is, do these lower-income households know how to take advantage of the tax code change? The second issue is, have we expanded financial literacy to those households so that they can learn about ways to prepare and file their tax returns and be rewarded for their efforts?
And the third ramification is economic. If the millions of eligible households of the United States receive a permanent shift of disposable income of about $2000 each, what will they do with that windfall? There, the answer seems to be “spend it.” Hence the spending on consumption by the household has a multiplier effect and benefits US economic growth meaningfully.
But how will each household learn to use the new tax rules? There is a mechanism, as the extended quote below shows:
“Representative Carlos Curbelo (FL-26), a member of the House Committee on Ways and Means, led a group of 55 bipartisan Members of Congress today to urge leaders of the House Appropriations Subcommittee on Financial Services to protect Internal Revenue Service’s (IRS) Taxpayer Services. These programs include Low Income Taxpayer Clinics (LITC), Tax Counseling for the Elderly (TCE), Taxpayer Advocate Service, and Volunteer Income Tax Assistance (VITA) grants – all programs specifically targeted to ensure tax payers have access to services where they can confidently file returns without fear of being scammed by fraudulent preparers.
“As you begin work on the Fiscal Year 2018 Financial Services and General Government Appropriations bill we respectfully request that you provide increased funding for the Internal Revenue Service Office of Taxpayer Services, including the Community Volunteer Income Tax Assistance (VITA) grants, Tax Counseling for the Elderly (TCE), Low Income Taxpayer Clinics (LITC), and Taxpayer Advocate Service,” the members wrote. “The work being done with funds provided for Taxpayer Services is commendable and worthy of your full and fair consideration.
“Funding for these essential services has received bipartisan support under both Republican and Democratic Administrations,” the members continued. “The House and Senate Appropriations Committees have continued to include strong funding for taxpayer services regardless of which party is in the majority. We appreciate your past support of these programs, and respectfully ask that you increase funding for the I.R.S. Office of Taxpayer Services programs in FY18, including Low Income Taxpayer Clinics, Community Volunteer Income Tax Assistance matching grants, Tax Counseling for the Elderly, and Taxpayer Advocate Service. These programs have already proven to assist the most vulnerable in our country and we thank you for your consideration of this request.”
Here is the link to the full release, and in it a reader will find details. https://curbelo.house.gov/news/documentsingle.aspx?DocumentID=1843.
Here is a link to use your zip code to locate a volunteer facility that may be helpful to anyone you know who needs tax assistance: https://irs.treasury.gov/freetaxprep/.
Please note that this initiative is truly bipartisan, as you can see by the list of the 55 members of Congress who signed onto the initiative.
We think the new tax bill will have its optimal benefit not only for households but the economy if financial literacy is part of the community response. Add $2000 of disposable personal income to millions of American households, and the impact is huge. Our job as upper-decile recipients of the tax bill’s largesse is to expand financial literacy so that lower deciles can benefit. If we succeed, the economy grows more robustly, and the society flourishes.
At Cumberland, we are sharing this information with all of our 45 households and encouraging them to take advantage of the services available. We are also helping a charter school in Bradenton with an initiative to educate the 100 households of their students. We are also looking for philanthropic ways to expand the volunteer aspect of this program.
We applaud the work of Congressman Carlos Curbelo and his 55 colleagues, who have set aside partisanship on this issue. They are an example of the way government should work. We and any readers who are motivated can help this effort. Please use your pen to publicize their effort and invite other readers and media to do the same.
And if your congressional representative is not one of the 55 who have already signed onto the bill, please ask them to do so.
And please remember that Cumberland is hosting a Financial Literacy Day on April 5 in Sarasota. Details may be found here, at the GIC website: https://www.interdependence.org/events/browse/programs/second-annual-financial-literacy-day-update-financial-markets-economy/. Note that this date falls within National Financial Literacy Month in the United States.
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