Packed into the new year’s fiscal cliff deal was some good news for working families, including a provision that extends the 2009 Recovery Act expansions to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) by five years—targeted expansions that strengthened these credits for working families in response to the Great Recession and weak economic recovery that followed. Together the EITC and refundable portion of the CTC (including the 2009 improvements) lowered the poverty rate by 2.8 percentage points in 2011, according to the Census Bureau’s Supplemental Poverty Measure (SPM). The impact on child poverty was even greater: under the SPM definition, the child poverty rate would have been 6.3 percentage points higher without these credits.
The SPM provides a more nuanced measure of poverty across the country, accounting for things the official poverty measure does not—like after-tax income, regional differences in housing costs, and the impact of government policies like the EITC and CTC. But until recently, data on the effects of particular anti-poverty programs were only available at the national level. Thanks to public-use files recently released by the Census Bureau, we can now estimate the extent to which the EITC and CTC have alleviated poverty in individual states throughout the country.
The map below illustrates the average number of people kept out of poverty by the combined impact of the federal EITC and CTC using the most recent data available. (Due to sample size issues, the map presents an average of three years of Current Population Survey data, from 2009 to 2011.) Every state was home to working families who were kept out of poverty by the EITC and CTC: large states like Texas and California saw more than 1 million people lifted out of poverty, while at the other end of the spectrum, these credits kept over 9,000 residents of North Dakota from falling below the poverty line.
Though currently the SPM only measures the effects of the federal tax code, many states also have local versions of the EITC that further strengthen the anti-poverty impact of the federal credit. And a number of these states and others are poised to make important decisions about state-level EITCs in the next legislative session. In North Carolina and Oregon, legislators will vote whether to extend their state EITCs, set to expire this year, while Utah legislators will decide whether to establish a state EITC for the first time. While Oklahoma and Kansas are likely to see proposals for a reduction in the size and impact of their state EITCs, Oregon and New Mexico could potentially expand their credits. As the new SPM data document, tens of thousands of individuals in each of these states are lifted out of poverty each year by the federal EITC, about half of whom are children. (See Table A for detailed data.) As working families continue to struggle with the aftereffects of the worst recession since the Great Depression, these states have the opportunity to make sure their tax codes are working for those families by enacting, preserving, or expanding state credits that boost the impact of the federal EITC.