New Report Recommends States Enact, Improve EITCs to Advance Racial Equity

By Lauren Pescatore

A new report from Prosperity Now finds that financial uncertainty continues to plague millions of Americans – especially households of color – and recommends improving state-level Earned Income Tax Credits (EITCs) as part of a broader policy agenda for advancing racial equity and improving economic security.

The 2019 Prosperity Now Scorecard combines data at the national and state levels to assess the financial wellbeing of American families “beyond the headlines.” For the first time, the Scorecard also ranks all 50 states on racial disparities to highlight how policymakers’ decisions at all levels of government disproportionately impact households of color. The report reveals that, despite touted economic progress, 57 percent of households of color are “liquid asset poor,” meaning they lack the savings to cover basic expenses after an unexpected emergency.

According to the Scorecard, state-level EITCs have the greatest anti-poverty effect on households of color, “resulting in an average benefit that’s $120 higher for non-White households.” The report recommends states enact new EITCs or improve existing credits to be refundable and worth at least 15 percent of the federal credit. Currently, 29 states and the District of Columbia offer state-level EITCs, but only 12 meet both of these requirements.

The report also recommends states stop “penalizing savings” by placing asset limits on public benefits programs, end discrimination against low-income renters, and take steps to put homeownership within reach for lower-income families. At the federal level, policymakers can improve financial security for struggling Americans by protecting vital safety net programs, enhancing consumer protections, and making our tax system more progressive, the report’s authors write.  

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