September, 2005

Education, Leadership and Persistence Pay off in Delaware
New State Earned Income Tax Credit will benefit 28,000 low-income workers

The State EITC Online Resource Center is pleased to present a special issue electronic newsletter on the new state Earned Income Tax Credit in Delaware. For more information, please go to: www.stateeitc.com.

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For Delaware state Senator Margaret Rose Henry, August 22nd was a momentous day - and a long time coming - as Governor Ruth Ann Minner signed legislation establishing a state Earned Income Tax Credit.

Delaware's EITC: • 20 percent of the federal credit • 14,000 Delawareans will no longer have to pay taxes • 14,000 Delawareans will pay less taxes

Senator Henry had worked for years to establish an EITC in Delaware and had finally passed a bill that creates a credit equaling 20 percent of the federal EITC. State officials project that 14,000 low-income Delaware tax payers will no longer pay state income taxes and another 14,000 will pay less in taxes. "This is a program that will boost the standard of living for hard-working Delawareans," Governor Minner said during the bill-signing ceremony.

"This is a proud day for me, for all the people who will benefit from the EITC and for all the advocates who worked so hard on this issue," said Senator Henry.

Delaware was one of five states that passed EITC legislation in 2005:
• Indiana extended its 6 percent EITC until 2011; it was set to expire at the end of 2005.
• The District of Columbia increased its EITC to 35 percent of the federal credit - making it the largest refundable state credit in the nation.
• Rhode Island increased its refundable EITC from 5 percent to 10 percent.
• Oregon made its 5 percent EITC refundable beginning in 2006 and increased it to 6 percent in 2008.

But Delaware was the only state to establish an EITC this year, and the successful effort offers lessons to other states that have yet to establish a credit. Three major factors contributed to the legislative success. A state-wide outreach campaign expanded public awareness of the federal EITC. A small but dedicated group of champions generated the necessary support within the General Assembly. And persistent advocates capitalized on a favorable state fiscal situation to win final approval.

>>Educating the Community and Lawmakers

The groundwork for the legislative victory in Delaware began during an extensive three-year public outreach campaign about the benefits of the EITC. The high-profile campaign helped make the public aware of the EITC, informed residents of who was eligible, and highlighted the economic impact the credit has on communities. The campaign also served to educate the elected officials who would have to approve a state version of the credit.

The Nehemiah Gateway Community Development Corporation (NGCDC) launched the Delaware EITC Campaign in 2002. The campaign, which is ongoing, promoted the federal EITC and offered free tax preparation, financial counseling and assistance setting up savings accounts to EITC-eligible taxpayers. The first year, the campaign was housed at one site and volunteers prepared 250 returns. The effort grew and in 2005, 400 volunteers prepared over 8,000 tax returns at 17 sites. That year, the campaign helped working Delawareans collect $11 million in additional tax refunds. The campaign has brought together state officials, community organizations, corporate volunteers and donors, media partners and local banks.

A key part of the effort was a marketing campaign to raise awareness among taxpayers who could benefit from the credit. During 2005, the campaign produced commercials in English and Spanish for television and radio that aired frequently, and the Wilmington News Journal provided unlimited free advertising. Area supermarkets distributed flyers to their customers, the Division of Social Services distributed a letter informing public benefit recipients of the free tax preparation sites, and the campaign sent postcards to previous years' customers. In addition, the campaign designated the period from January 15 to February 15 as "Tax Help for Working Families Month," complete with a proclamation signed by the governor.

Senator Margaret Rose Henry with Mary Dupont, Executive Director of the Nehemiah Gateway Community Development Corporation

Advocates said that when the Delaware EITC Campaign began four years ago, many Delawareans had little understanding of the federal EITC. "The growth of the state-wide EITC campaign has really generated a level of awareness," said Mary Dupont, executive director of the Nehemiah Gateway Community Development Corporation. "When I say EITC, people now know what it is."

Dupont and Senator Henry agreed that the Delaware EITC Campaign also played a key role in informing legislators about the credit and the financial impact it could have in their communities. Giving lawmakers that understanding was a crucial step in ultimately passing an EITC bill in the legislature.

>>Champions of the Cause

The Delaware experience made clear that a successful EITC campaign requires strong leaders and Delaware had three: Mary Dupont, Senator Henry, and state Treasurer Jack Markell.

As the only African-American senator in the Delaware legislature, Senator Henry has embraced issues that benefit the working-poor families of Delaware, many of whom live in her district in eastern Wilmington. Among them was the EITC issue, which she had pushed unsuccessfully for eight years.

This year, she turned for help to a coalition of advocates and supporters involved in other issues. "I started a coalition of youth-serving agencies working on juvenile justice issues," she said. "When I talked to the groups about the Earned Income Tax Credit they adopted the cause as one of their own. They realized that the more we can help low-income working families to be self-sufficient, the stronger our communities will be."

A natural ally was Nehemiah Gateway Community Development Corporation, which had been working for several years to promote the federal EITC. This year, the organization launched a grassroots lobbying effort. Dupont and her staff contacted 150 federal EITC recipients and helped these low-income Delawareans write letters to their representatives. "It's important for legislators to see that this will benefit constituents in their district," said Dupont.

Jack Markell is the public champion of the cause

The third key supporter was Jack Markell. Now in his second term as State Treasurer, Markell has made "financial education" a major focus. When Mary Dupont approached Markell to be the public champion of the EITC campaign, he readily agreed and worked hard on the issue. During this year's campaign, the governor signed 30 original copies of the "Tax Help for Working Families Month" proclamation, and advocates sent them to area churches. Markell followed up with visits to the churches on Sunday mornings to talk about the EITC and the state campaign. "Jack is an incredible champion, he's right there, he's accessible, he's on board," said Dupont.

The three leaders played crucial roles. Dupont created a highly-successful EITC outreach campaign that not only brought millions of dollars to low-income Delawareans but also educated lawmaker of the importance of the credit. Senator Henry was the persistent advocate on the inside who would not let her legislation be forgotten. And Jack Markell brought high-profile attention to the issue.

>>Be Persistent and Look for Opportunities

Senator Henry first proposed a state EITC bill in 1997 but the legislature rejected the idea. Some dismissed the credit as simply a hand-out. But over time, advocates educated and persuaded lawmakers on both sides of the aisle. This year, national and state advocacy groups held educational sessions with legislators. Jack Markell and Saul Hoffman, the chairman of the economics department at the University of Delaware, wrote op-ed pieces in the Wilmington News Journal promoting the EITC.

All of the education efforts focused on the economic impact the EITC has on working families, stressing that it rewards work and is not a "hand-out." Advocates pointed out that 9 percent of Delaware households can benefit from the EITC. The arguments resonated with both Democrats and Republicans.

Senator Henry also worked to win support from not only Markell, the treasurer, but also from Governor Minner, who was elected in 2001. That powerful support proved crucial this year, keeping the EITC bill alive until lawmakers began making key decisions at the end of the legislative session.

With the state enjoying a budget surplus, the General Assembly considered several tax relief measures. Senator Henry kept reminding her colleagues of the importance of cutting taxes for low- and moderate-income workers and she won the support of the Democratic Caucus in the Senate. During pivotal budgetary negotiations, senior lawmakers and administration representatives also embraced the EITC proposal - along with a cut in the state's gross receipts tax on business. The final bill established a credit that will be 20 percent of the federal EITC, although non-refundable if the credit exceeds a taxpayer's income tax liability.

As part of the final fiscal agreement, the EITC legislation passed the Republican House and Democratic Senate unanimously.

"The state EITC finally reached a tipping point," said Dupont. "The EITC outreach campaign generated enough awareness about the EITC among legislators, and Senator Henry worked with her colleagues to ensure that this year the legislation was passed."

Looking ahead, Senator Henry hopes to make the credit refundable, meaning that if the state credit exceeds the amount of income tax owed, the difference is paid back to the filer in the form of a rebate. A refundable credit can partially offset payroll and sales taxes which for low-income workers can be more burdensome than income taxes.

"My colleagues were supportive of the bill this year because I had worked on the issue for so long," said Henry. "They were more willing to support a non-refundable credit this time around, but I'm going to keep at it until I convince them to make it refundable."