New Study Shows EITC is Even More Effective at Increasing Employment, Reducing Poverty

By Kate Skochdopole

The EITC is even better than we thought.

A study released this month in The National Bureau of Economic Research revealed researchers have previously underestimated the effect of the federal Earned Income Tax Credit (EITC) on reducing poverty. Hillary Hoynes of the University of California/Berkeley and Ankur J. Patel of the U.S. Department of the Treasury, found that among families headed by single women, policy-induced EITC increases of $1,000 boosted employment by 7.4 percent and decreased the share of these families below the poverty line by 9.4 percent.  That means the credit is twice as effective at reducing poverty as originally thought.

This research further proves that the EITC is one of the nation’s most effective safety net programs – a concept many state policymakers embraced this year. So, as Voxs Dylan Matthews asks, when will we see the same level of support for the EITC at the federal level?

Many experts predict the EITC will be a centerpiece of the tax reform plans emerging from the 2016 presidential race. Ron Haskins of the Brookings Institution recently told Tax Credits for Working Families that “the EITC is bound to play a big role” in presidential politics, and The Washington Post’s Jennifer Rubin advised GOP candidates to embrace the EITC in order to compete with Democratic opponents. It’s likely that many vying for the presidency will join President Obama and House Ways and Means Committee Chairman Paul Ryan in calling for an expansion of the federal EITC.

For more updates on how the EITC helps millions of families each year, as well as a presidential tracker that details each candidate’s position on tax credits for working families, visit our website.