Employers can give pay raise through tax help

Walking through my office last week, I overheard some employees talking about what a long stretch it was between paychecks. Yes, when you get paid on the 15th and on the last day of the month, there are some months that add an extra day or two between checks. Most of us have been there, living paycheck to paycheck, saving little if anything. But there is more we as employers can do to help our employees — and the regional economy.

Various economic agencies talk about the jobs, growth, money and spending they want to bring to the Inland Northwest. So, why do we continue leaving $4.3 million on the table each year? That’s the amount forfeited by the more than 7,200 eligible families or individuals who did not take the Earned Income Tax Credit in Spokane County in 2004, according to the Internal Revenue Service.

So, how does it work?

“ Consider a family with one child, making $30,000 per year. Both parents work at least part time, and meet the other simple requirements of the EITC. While at the top of the allowable income bracket, this family could see an extra $700 per year by using the EITC.

“ A single person with one child making $11,750 per year would be at the bottom of the income guidelines, qualifying the family for a “raise” of about $4,000 per year.

In both cases, the families would be living paycheck to paycheck. Any extra income they bring home or receive as a tax refund would not be spent on a trip to Europe. They would buy a steak dinner at the local grocery, have some dental work done, pay off a medical bill, purchase furniture or buy clothing. Consider this figure again, an additional $4.3 million dollars in Spokane County alone. I bet we would feel that effect, over and over again.

Studies show that people are pretty predictable when it comes to what they do with the extra money. First year, they pay bills. Second year, they make a large purchase. Third year, they begin saving money.

Here’s a local success story: A single mom who had not filed taxes in three years was thinking there was not much reason to bother. But after some encouragement, she filed and received a refund of $13,000, thanks to the EITC. A national success story? United Parcel Service makes a genuine effort to educate its employees by including a presentation on this subject during company-wide Benefit Days.

Will we ever see the entire $4.3 million here in Spokane County? Doubt it, but as employers we can educate our work forces about taking advantage of reduced taxes, thus increasing their take-home pay. What a great way to help your employees by giving them a hand up, at little or no cost to you or your company.

We owe it to our employees and our communities to share this knowledge with anyone making under $30,000 a year, and there are a number of agencies ready to help do that:

“ United Way of both Spokane and Kootenai counties can send employers in the right direction.

“ Spokane Neighborhood Action Program (SNAP) offers a financial literacy program for employees.

“ Contact your company’s CPA for details.

“ Visit www.irs.gov, then click on the tab for “Individuals” and choose “Earned Income Credit” under Topics.

There is a community coalition working to improve the financial resources of lower-income workers in the Spokane area. Led by the United Way, members include the City of Spokane, Community Colleges of Spokane, SNAP, Avista, Wells Fargo, the Department of Social and Health Services, AARP’s Tax Aide, and the IRS.

I can’t think of a better example of helping a staff person grow than with a simple and profitable bit of financial education.