By John Lyon
Arkansas News Bureau

LITTLE ROCK — Arkansans spend about $100 million a year obtaining loans against anticipated tax refunds, according to a report released today by Arkansas Advocates for Children and Families.

The report also estimated that Arkansans miss out on as much as $110 million a year by failing to claim the federal earned income tax credit.

“Low-income tax filers are paying tax preparation fees, in many cases exorbitant tax preparation fees to have their taxes done, when in fact most low-income families could receive free tax assistance through an existing VITA (Volunteer Income Tax Assistance) site,” Rich Huddleston, executive director of Arkansas Advocates, said at a news conference to announce the report.

The report authored by Ginny Blankenship, research and fiscal policy director for Arkansas Advocates, estimated that in 2006, low-income Arkansans spent $21.6 million on fees for refund anticipation loans and $78 million on tax preparation fees.

The highest use of refund anticipation loans is in counties with large percentages of low-income and African-American residents, according to the report.

The 10 Arkansas counties where the most refund anticipation loans were issued in 2006 were, in descending order, Phillips, Crittenden, St. Francis. Lafayette, Hempstead, Desha, Lee, Chicot and Jefferson counties.

Earlier this year, the state Legislature passed a law placing some restrictions on companies that offer refund anticipation loans.

“That law is a great first step, but it’s really just about transparency, to make sure that low-income families have more information up front about how much these fees cost, but it really does not regulate the size of the fees,” Huddleston said.

Arkansas Advocates “would definitely support a stricter law,” he said.

The report estimated that Arkansans lose between $88.5 million and $110 million a year by failing to claim the federal earned income tax credit, based on the IRS’ estimate that 20 percent to 25 percent of people eligible for the credit are not claiming it.

Arkansas taxpayers who claimed the earned income tax credit in 2006 spent about $35 million on tax preparation fees, according to the report.

“As a result, millions of our tax dollars ultimately serve as an ‘economic stimulus’ for for-profit tax preparation companies rather than a safety net for low-income (people) they were intended to help,” Blankenship wrote. She recommended expanding the number of VITA sites in the state.

A call to tax preparer H&R Block was not immediately returned Monday afternoon.

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On the Net:
www.aradvocates.org