New Research Shows EITC Could Help Keep People Out of Prison

By Devin Simpson

Expanding state-level Earned Income Tax Credits (EITCs) and increasing the minimum wage could reduce recidivism rates among formerly incarcerated Americans, according to a new report.

The Minimum Wage, EITC, and Criminal Recidivism examined policy changes to 21 state-level EITCs and 200 state and federal minimum wage increases to determine their impacts on recidivism. The findings show that when formerly incarcerated individuals are paid more, they are less likely to repeat “revenue-generating” criminal activity.

Increasing state-level EITCs reduced recidivism rates by 1.6 percent for women, but had no notable effect on those same rates for men, according to the report. The study’s authors posit that this disparity is due to the EITC’s focus on custodial parents, who tend to be women. Expanding the credit for workers without dependent children, an idea that enjoys significant bipartisan support, could replicate those benefits for men.

The report also found that recidivism rates dropped by 2 percent for every 8 percent increase of the minimum wage – a significant reduction considering mass incarceration’s drain on the economy. The U.S. spends more than $80 billion on public corrections agencies each year. Reducing recidivism rates by only a few percentage points could mean hundreds of millions in savings for federal and state budgets.

With more than 2.2 million Americans in prison, the U.S. has the highest incarceration rate in the world.  What’s more, mass incarceration disproportionately affects people of color and low-income Americans, exacerbating the growing racial wealth divide. While the EITC is often omitted from the discourse on criminal justice reform, this report sheds light on the connection between income-boosting policies and reducing incarceration rates. Given the credit’s bipartisan support, criminal justice reform advocates may start to consider EITC legislation as an additional opportunity for progress.

To read the full report, click here.