Every year, working families file to claim state and federal Earned Income Tax Credits (EITC), which are a refundable tax credit that can put hundreds of dollars back in the pockets of low-income workers. This cash infusion allows many working Oklahomans to cover the costs of daily needs like groceries, rent, utilities, and medical expenses. The federal EITC has been proven to be a powerful anti-poverty tool, lifting 5.6 million people out of poverty in 2018 alone, and offering Oklahomans an average refund of $2,547 in 2020.
In Oklahoma, the state EITC benefits more than 303,000 people, but the effectiveness of the state EITC has been curbed by a variety of factors, one of them being the exclusion of tens of thousands of working Oklahomans who might otherwise be eligible for the state’s EITC. State tax policy keeps Oklahoma residents who file taxes using the Individual Taxpayer Identification Number (ITIN) — foreign nationals, international students, undocumented immigrants, and other noncitizens who report earned income here — from receiving the state’s EITC. Allowing these workers the opportunity to receive the tax credit can put money back into our state and local economies. Our state should end state-level EITC exclusion for ITIN filers who pay their fair share in taxes and allow them to receive the tax credit they’ve earned.
Individual Taxpayer Identification Numbers help ensure we all pay our fair share
In the mid-1990s, the IRS created ITINs to allow individuals who do not have or are ineligible for a Social Security number to file their taxes. Since its creation, ITIN filers have contributed billions to the U.S. economy. For example, in 2014, ITIN filers paid more than $9 billion in annual payroll taxes.
Based on national numbers, the number of ITIN filers in Oklahoma is somewhere between 1 to 3.5 percent of total filers. ITIN filers contribute millions to the Oklahoma economy and paid at least $75.5 million in state and local taxes in 2019. Of Oklahoman’s ITIN filers, almost 23,000 are eligible for the EITC. Assuming full participation, expanding the credit to ITIN filers could inject about $1.5 million back into Oklahoma’s state and local economies since most of the EITC refund is spent on groceries and restaurants.
ITIN filers have earned the right to receive the EITC
Tax benefits, like the EITC, are designed to recognize the contributions of workers to the economy and provide tax breaks to low- and moderate-income workers. Each year, a small portion of the taxes paid by workers funds programs like the EITC, meaning that all taxpayers — including ITIN filers — contribute to this program. Yet, despite paying what they owe, tax filers with an ITIN number cannot reap the rewards of their labor since this identification number is solely for tax reporting purposes, and it does not provide access to Social Security benefits or work authorization.
It is unfair to exclude individuals from a tax benefit to which they have contributed, and it causes ITIN filers to be left without the financial relief they have earned after working hard and paying taxes. However, states can address this inequity by making state-level tax credits, specifically the EITC, available to ITIN filers. A number of states like Colorado and New Mexico have already expanded their state-level EITC to include these individuals. Doing so in Oklahoma would have a positive effect because the EITC is proven to promote work, economic security, educational performance, and even better health outcomes for low- and moderate-income families. Oklahoma can take a step forward and end state-level EITC exclusion for ITIN filers.
ITIN filers are a part of our community
A dimension that we cannot ignore in discussing the EITC and ITIN filers is that many of our friends and neighbors are immigrants who have ITINs, and they have been hit disproportionately hard by the COVID-19 pandemic. A more inclusive tax code has the power to dismantle persistent inequities, particularly in Oklahoma where we rely heavily on sales and excise taxes, creating a regressive tax system that hurts lower income families. Being able to receive the EITC would make a big impact on working families, especially since immigrants historically have been restricted from, or left out altogether, from federal programs.
The EITC is designed to benefit low- and moderate-income families by supporting their economic security. Because structural racism has concentrated poverty in communities of color, the EITC has proven to be a step towards a more just tax policy. Expanding the EITC to ITIN filers is a logical extension of the EITC’s role in making Oklahoma’s tax code more equitable.
It’s time to improve Oklahoma’s EITC as a whole
The COVID-19 pandemic has proven the need to invest in the health, safety, and well-being of everyone who lives in our communities. At the federal level, there is discussion about expanding federal tax credits and ending federal exclusion for ITIN filers which is a step forward, but Oklahoma is uniquely poised to be able to make meaningful reform at the state level to help Oklahoma families most in need, starting with the EITC. While our state’s legislature restored EITC refundability during the 2021 legislative session, there are still many issues to address to ensure that the state invests in the health and success of all Oklahomans. Ending the state-level EITC exclusion for ITIN filers would represent an investment in our people and our communities, especially during these trying times. For years, ITIN filers have contributed significant amounts of taxes to our state; it is time we give back to them as well.