These States Stand to Lose Out Big Time if Congress Allows the EITC to Face Cuts

By Kate Skochdopole

Colorado, Hawaii and Utah are among the states that will feel the greatest impact if Congress does not renew key provisions of the federal EITC, according to a new paper from the Brookings Institution.

Brookings Metro Graphics - Excel Template - 10.22.15.xlsxFully 7.4 million filers could lose part or all of their benefits if Congress fails to renew EITC provisions that increase benefits for married couples and families with three or more children, according to the authors, Elizabeth Kneebone and Natalie Holmes of Brookings’s Metropolitan Policy Program.   The provisions are scheduled to expire in 2017. Among the hardest hit states, 48,500 number of filers would lose some or all of their benefit in Idaho; 83,200 would lose some or all in Utah and 43,900 would lose some or all in Nebraska.

If the provisions are made permanent, filers in the West and Midwest and those working manufacturing and retail jobs would benefit most.

Even as the EITC faces cuts, several proposals are in the works to expand the credit. For example, the paper, Strategies to Strengthen the Earned Income Tax Credit, examined plans to expand the EITC for childless workers – a proposal that has bipartisan support from President Obama and Speaker Ryan. They found these plans could benefit 17.7 million filers, most of whom are employed in service industries, healthcare, and construction. Under the proposals, several cities in the Northeast and Midwest could see their populations of childless workers collecting the EITC more than double.

“In this era of partisan gridlock in Washington, it is rare to find a policy with the kind of bipartisan support the EITC has received—a testament to its effectiveness in encouraging work, alleviating poverty, and improving outcomes for workers and their children,” the authors wrote. “By preserving key provisions of the EITC for working families and by making the EITC work better for workers without qualifying children, millions of Americans across the country stand to benefit.”