A cash lifeline for Boston’s working poor
A new book reveals how some struggling families here and around the country manage to make ends meet.
Among East Boston’s working poor, February means more than just snow, slush, and ice. Despite the dreary weather, it is the most eagerly anticipated month of the year — some say it is even better than Christmas. On busy Bennington Street, the windows of H&R Block, the tax preparation service, are plastered with bright green signs offering “Money in Minutes.” When we visited, there were another six businesses nearby that were offering the same, in Spanish as well as in English. For much of the year, H&R Block offices escape notice. But each February, taxpayers who are eager to collect a refund check that includes their Earned Income Tax Credit (EITC) make them among the busiest places around.
In 2007, we interviewed 115 families from across the Boston area for our book, It’s Not Like I’m Poor. Among those we met was a single mother of three we call Marissa (to protect her privacy). For her, the EITC could deliver as much as three months’ earnings in one check. As a medical assistant, Marissa’s hourly wages were better than some, but because she was employed through a temp agency, her earnings fluctuated dramatically. “Sometimes I’m able to get 40 hours a week, other times I’m lucky if I get eight,” she explained. Her eligibility for SNAP (formerly known as food stamps) could change from month to month as her paycheck varied, and she couldn’t always count on her kids’ fathers to pay child support. But tax time was the one time of year when she knew her finances would improve.
The nation has long struggled to address the problems of working-poor families like Marissa’s. The EITC has turned out to be a most unusual policy, one that is popular on both sides of the political aisle. Launched 40 years ago as a tiny refundable tax credit for low-income workers with children, it was bolstered in the ’90s to provide eligible families with as much as several thousand dollars as part of a refund check at tax time. Today some 27 million families claim it each year, compared with less than 2 million who receive cash welfare.
The EITC has become a policy that can truly “make work pay.” And it is astonishingly easy to apply for the benefit, since it requires the same documentation that every working American submits at tax time — W-2 forms and Social Security numbers. Families can fill out the forms themselves or with the help of volunteer organizations or the friendly folks at H&R Block (for a fee, of course).
But the EITC hasn’t resolved the worries that plague the lives of the working poor. To truly understand how families are faring in this new era, we have to appreciate how they make ends meet in the months that they don’t have the big refund check to draw on. While February, March, and April are typically good months, May through January can be much more difficult.
For parents whose annual incomes generally hover around the poverty line — the average among families we interviewed was $22,000, although a quarter of households earned less than $15,000 — instability is endemic. This isn’t just true for temp workers like Marissa. Wait staff get sent home when the restaurant is empty; home health workers see their hours fluctuate every time a patient falls ill and enters the hospital; and retail workers may see their schedules bounce around from week to week. During the course of the year, therefore, an expense that might be manageable one week when work hours and income are good — like paying a plumber to snake a drain — becomes impossible the next, representing another expense added to the credit card bill, left there accumulating interest. This combination of low and volatile earnings leaves families with limited ability to cope with unexpected — and sometimes even expected — expenses. Paying down those bills is just one reason that the big refund check at tax time can be so important.
Despite the temptations to spend such a windfall indulgently, we learned in our study that parents’ spending decisions were far more mundane: One-quarter of refund dollars went to current bills, like groceries and rent; another quarter was spent on debt, such as old credit balances and student loan payments; and nearly four out of every 10 dollars were put into savings or spent on durable goods, like used cars. Only one out of every 10 dollars went to treats, often a meal at a sit-down restaurant or children’s birthday presents.
But there’s a further benefit of the EITC: While cash welfare stigmatizes its recipients, tax credits put them among the mainstream, filing taxes and claiming refunds like other working Americans. Furthermore, many associate the refund with getting ahead, not merely getting by. Although the financial realities of being a low-income parent often intervene, many EITC recipients envision using their refund check to start a college savings account for their kids or make a down payment on a home. “Hitting the lottery” at tax time doesn’t erase the month-to-month challenges of making ends meet on meager wages; nonetheless, the new system of supporting disadvantaged families makes the dream of a middle-class life for parents like Marissa feel more tangible.