EITC Is Potential Tool to Help Low-Income Workers Through COVID-19 Crisis

By Devin Simpson

As low-income workers grapple with the economic impacts of the global COVID-19 pandemic, tax experts and policymakers are looking to the Earned Income Tax Credit (EITC) as one way to help.

Across the U.S., cities and industries are shutting down to halt the spread of the coronavirus, which has led to reduced wages and lay-offs for many low-income workers, particularly those in the food service industry. As these circumstances continue for the foreseeable future, federal lawmakers are looking for policy solutions to provide Americans with financial relief. Last week, U.S. Representatives Ro Khanna (D-CA-17) and Tim Ryan (D-OH-13) proposed legislation to establish an emergency federal EITC worth between $1,000 and $6,000 for every American that earned less than $65,000 last year.

“Nearly half of working Americans don’t have the cash to cover a $400 emergency,” said Rep. Tim Ryan. “As more folks are staying in and taking necessary steps to avoid spread of the coronavirus, more Americans will struggle to cover basic needs like rent, groceries, and medicines. We can’t have Americans choosing between losing a paycheck or a job and taking the necessary precautions to keep their families safe. This measure will minimize the economic fallout for hard-working Americans so we can all focus on getting our country healthy again.”

Many tax policy experts agree with Representatives Khanna and Ryan, citing the EITC as a strong policy solution to slow down an economic shutdown. Elaine Maag, principal research associate at the Tax Policy Center, detailed in Forbes why Congress should invest in the EITC during this period. Maag argues that by utilizing a program that targets low-income households, the federal government can more effectively provide income security for workers who are temporarily unemployed or have lost wages, while boosting the economy.

Maag also recommends the government structurally reform the credit to allow advanced payments, give families an additional payment this tax year, or permanently deliver the credit throughout the year in installments. However, Maag also draws attention to the shortcomings of the credit to provide relief to all groups facing financial setbacks such as workers without dependent children and workers who lose their job for the entire tax year. She highlights proposals such as the Economic Security Project’s Cost-of-Living Refund and the federal Working Families Tax Relief Act as opportunities to close those gaps.

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