School of Law Seminar Series - Taxation, Poverty, and Social Policy

Professor Michelle Drumbl, Robert O. Bentley Professor of Law at Washington and Lee University School of Law and Director of the school’s Tax Clinic

Wednesday 25 November 2020 at 13:00 online


“For millions of low-income individuals in the United States, the act of filing an income tax return constitutes a critical part of their social safety net. The Earned Income Tax Credit (EITC), a refundable tax credit, is an anti-poverty benefit designed to help low-income workers support their families. The EITC is delivered in a lump sum as part of the claimant’s annual tax refund. The maximum available credit is just over $6,600, with the amount of the credit determined by the individual’s income, filing status, and the number of qualifying children claimed.  
 
From a policy design perspective, there are advantages to using the revenue agency to deliver social welfare benefits, including inexpensive administration and high participation rates. There are challenges as well. It is a cruel irony that many EITC recipients pay hundreds of dollars to a commercial tax return preparer in order to claim this anti-poverty benefit. In some cases, recipients fall prey to a preparer’s incompetence or unscrupulous practices, with the recipient held responsible if the Internal Revenue Service discovers errors.   
 
In my current work I examine some of the questions surrounding the regulation of the commercial tax return preparation industry: What types of regulation are effective? Should Congress enact a federal regulatory scheme, or should regulation be left to the individual states? Finally, how might we balance the needs of the most vulnerable taxpayers with the burdens and costs of regulation?”