Tax Refunds and Microbusinesses: Expanding Family and Community Wealth Building in the Borderlands

Abstract

The Earned Income Tax Credit (EITC) is the largest antipoverty fiscal policy program for working families administered by the Internal Revenue Service (EITCs totaled $42 billion in 2003). For the 2004 tax season, U.S.-Mexico border county EITC refunds reached $1.9 billion while total tax refund amounts for low-income borderlands families topped $2.6 billion. Questionnaires administered during the tax-filing season to working families in Texas, New Mexico, Arizona, and California border counties collected more than forty-five hundred surveys that canvassed respondents on a variety of financial behaviors and tax refund expenditures. Additionally, researchers recorded data on tax filers using their tax refunds to capitalize microbusinesses and respondents' desires to know more about operating a microbusiness. Empirical analysis employing logistic regression produces results that parallel previous findings in the literature and suggests actionable policy prescriptions that may support family and community entrepreneurial activities in the borderlands.

Keywords

Earned Income Tax Credit microbusiness and self-employment asset building programs

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