EITC ‘Fraud’ Delays – and Lack of Transparency – Adding Insult to Injury for New Jersey’s Working Poor
While nearly 100,000 New Jersey taxpayers have waited for over $50 million in 2011 income tax credits, ostensibly as part of the Treasury Department’s new fraud screening process, NJPP’s efforts to obtain up-to-date information about the delays have hit a wall, raising more questions about why these families have been denied their benefits.
The fraud review first came to light in April, when the Treasury – responding to an inquiry from the Office of Legislative Services – said that 98,812 taxpayers still had Earned Income Tax Credit (EITC) claims of $53.5 million pending from their 2011 tax filings.
Since a delay of such magnitude was unusual and harming vulnerable families, NJPP wanted to get an update on the situation. We filed an Open Public Records Act (OPRA) request in mid-July to find out how many of these 98,812 taxpayers remained in limbo – and see how many 2012 tax filers were also caught up in this screening process.
Although what we received on September 11 may have met the legal provisions of OPRA, it was certainly less than satisfying.
After requesting two extensions, Treasury provided only a copy of the exact same information provided to OLS in April – clearly not the most up-to-date information available. The department’s response raises a number of questions. Why did it take 66 days to simply copy a document? More importantly, why have these nearly 100,000 taxpayers been denied their EITC benefits? Are we to believe they all have been committing fraud, or is it simply an effort to make taxpayers jump through additional hoops to get the benefits that they deserve and desperately need? Has Treasury attempted to follow up or have they just left the taxpayers to fend for themselves?
Given these still-unanswered questions, NJPP submitted an updated OPRA request on September 16 requesting more specific and up-to-date information on delays affecting both the nearly 98,812 filers from April 2012 and any from April of this year. The response from Treasury was the same: no response within the initial ten-day timeframe required under the law and, eventually, a request for an extension to October 4. The department’s continued delays providing information that could easily be obtained within one or two days is troubling, to say the least.
The EITC is one of the most effective anti-poverty programs in existence. Its recipients are working hard and trying to climb out of poverty, but they struggle to make ends meet in high-cost New Jersey (a family of four with an annual income of about $40,000, for example, receives a modest but important $434 state tax credit). That’s why the state has its own EITC that piggybacks on the federal EITC. Unfortunately, the EITC benefits were cut by 20 percent in 2010, resulting in a tax increase on 500,000 working families, and legislative attempts to restore the benefits have been rebuffed by the governor. These egregious and widespread delays working families are now facing are adding insult to injury.
The legislature cannot treat this issue lightly. Every fifth EITC household is being denied funds it expected to receive one and a half years ago – without explanation or public evidence. The legislature should demonstrate urgency so we can find out why these families are still waiting for their EITC benefits and what the Treasury’s fraud-screening process is actually intended to accomplish. Is there evidence of fraud or is this primarily a budget-balancing measure where the administration “borrows” the money from poor families without paying interest? And why is EITC – not other tax credits or deductions that may involve far more state dollars – being singled out for closer inspection?
Maybe the backlog has been cleared up and these striving but poor families finally have their credits. If that’s the case, you can be sure that our informational request would have been answered quickly.