New Report Highlights EITC as Policy Solution for Millions of Americans Stuck in Economic Limbo

By Lauren Pescatore

The Earned Income Tax Credit (EITC) is vital for helping the millions of working Americans who may be getting by but aren’t getting ahead, according to a new report from Prosperity Now (formerly CFED).

The 2017 Prosperity Now Scorecard finds that despite a gradual decline in unemployment and poverty rates overall, too many working Americans remain stuck in economic limbo. Each year, the Scorecard assesses financial health across all 50 states and the District of Columbia and offers policy responses for lawmakers.

Among those responses are income-boosting policies like the state and federal EITC. Not only do these policies reduce taxes on lower-wage workers, they also help them to pay off debt and save for unexpected emergencies. States can complement the federal EITC by enacting state-level EITCs or improving existing ones. According to the report, these state-level credits are most effective when they are both refundable and worth at least 15 percent of the federal credit.

This year, an unprecedented number of states took action on the EITC. Hawaii, Montana and South Carolina enacted new state-level credits, while numerous other states improved existing ones. Currently, 29 states and the District of Columbia offer state-level EITCs. However, by the Scorecard’s criteria, only 11 are of large enough scale to make a significant difference in helping lower-income workers achieve financial stability. According to the report, states should enact EITCs that are both refundable and worth at least 15 percent of the federal credit as part of a broader policy agenda to move working families out of economic limbo.

To view the full list of state rankings and other Scorecard findings, click here.