Washington, DC – Ensuring a path to economic and financial security for low-income workers through use of the tax system will help close the wealth gap, according to National Council of La Raza (NCLR), the largest national Hispanic civil rights and advocacy organization in the U.S., which today released a white paper entitled Making Your Taxes Work for You. The paper, which was based on information gathered from a workshop at the 2006 NCLR Annual Conference, sheds light on ways that Latinos can develop assets and improve their economic security through the tax system such as using their tax returns to build savings accounts.

“Latino workers file and pay millions of dollars in federal income taxes, but many have little knowledge on how those tax dollars can work for them,” said Janet Murguía, NCLR President and CEO.

Workshop panelists highlighted ways in which Latino taxpayers can better access and participate in asset- and wealth-building tax provisions. For many Latino taxpayers there is a lack of knowledge about how the tax system can work for them and how they can use tax credits, such as the Earned Income Tax Credit and the Child Tax Credit, and deductions to build savings.

Moderator Kilolo Kijakazi of the Ford Foundation emphasized that for the typical American middle-class household, wealth is mostly accumulated through home equity and retirement accounts, both of which are subsidized through the tax system. But many Latino low-wage workers do not have access to these programs because they are less likely to work for employers who offer 401(k) retirement plans.

Other key points raised:

Many low-income workers do not know the importance of the Earned Income Tax Credit (EITC). The EITC is a refundable tax credit for low- and moderate-income wage earners, which has helped to reduce poverty in many communities. Yet, many low-income families do not apply for the credit. One survey found that of low-income parents, 27.1% of Hispanic parents had heard of the EITC, while 68% of non-Hispanic Black parents and 73.5% of non-Hispanic parents had heard of it.

Misunderstanding about taxes and tax policy exist in the community; relevant financial planning can help respond to it. Rather than viewing tax time as something negative, panelist Louis Barajas, of Louis Barajas Wealth and Business Planning, noted that tax time should be viewed as a key opportunity to discuss a family’s financial situation and to plan to develop assets and further economic security.

“This paper highlights the importance of a fair tax policy to the Latino and low-income taxpayer communities. As Latinos will make up a greater percentage of workers and taxpayers in the years to come, it is important to ensure that Latinos are able to access and use the tax system as an asset-building vehicle to enhance their economic security,” added Murguía.

To download a copy of the white paper, go to www.nclr.org.

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