Guest Post: New Research Shows States Without an EITC Program Are Those That Would Benefit Most

This post was written by Douglas Gagnon, Beth Mattingly, and Andrew Schaefer of the Carsey School of Public Policy at the University of New Hampshire.

The federal EITC remains the largest and most effective anti-poverty policy for working families in the United States, with nearly one in 10 Americans receiving the credit. To better understand how the EITC helps low and moderate earners, we examined the hypothetical changes in Supplemental Poverty Measure rates that would result from the removal of federal EITC benefits.

We found that the effect of the federal EITC is substantial: absent this program, and all other things being equal, an additional 2 percent of the entire U.S. population, and 4.3 percent of all children, would have been poor. (The complete brief is available here.) The fact that so many Americans are on the brink of poverty serves as an important reminder of the importance of the federal EITC.

We also found variability across states and regions in how much the federal EITC keeps families out of poverty. This is especially true with child poverty since EITC benefits are considerably more generous to families with children. For example, child poverty would increase by nearly a third in the South, compared to less than one-quarter in the rest of the country.

Differences become even more meaningful when looking at state-level estimates: Arizona, Kentucky, North Carolina and Texas would see at least a 6 percentage point increase in child poverty rates if the EITC were removed – nearly three times the rate in states such as Minnesota, New Hampshire, North Dakota and South Dakota. Such findings are driven by the tremendous differences in the proportions of children living in near-poverty across U.S. states.

In addition to the federal EITC, 26 states and the District of Columbia offer their own EITC program. State EITC programs are typically structured to match a certain percentage of the federal EITC. The level of matching varies considerably across participating states—from a low of 3.5 percent in Louisiana to a high of 40 percent in Washington, D.C.—with the average participating state contributing about 16 percent of the federal EITC subsidy.

Unfortunately, our research reveals that the very states with poverty rates most effected by the federal EITC are also much less likely to have a state EITC program. In fact, of the 10 states that would experience at least a 5 percentage point increase in child poverty absent the federal EITC, none support a state EITC program.  Such a stark trend is disconcerting. We hope that our research may serve to highlight those places where the implementation of a state EITC program could be especially consequential for America’s working poor and near-poor.

You can find more information about this research here.