Redefining Freedom: How Claiming the EITC Brings Us Closer to Economic Liberation

Nandini Singh

In 2023, the notion of freedom, and what it takes to achieve it, has changed from the nascent days of this country. Originally founded on central principles enabling its citizenry to think freely and live autonomously, the United States’ prioritization of such liberties as freedom of speech, religion, and assembly empowered the American public to freely exchange ideas and information, practice faith openly without fear of persecution, and rally together to collectively express and defend their views.

However, the modern idea of ‘freedom’ – and the components necessary to achieve it— has changed dramatically as we confront today’s economic inequities that have too many Americans struggling to meet their basic needs—effectively keeping many trapped in a cycle of poverty that impedes their ability to achieve the economic security necessary to be truly “free” today.

In order to meet Americans’ foundational needs and help advance economic freedom, advocates, lawmakers, and other stakeholders have for years explored how to leverage existing solutions, such as the Earned Income Tax Credit (EITC). The EITC, for low- and moderate-income households, can help alleviate financial burdens that may stifle their ability to thrive. In taking advantage of anti-poverty tools like the EITC, workers and families can better navigate financial challenges, children can access the tools and resources needed to support their academic achievement, and local economies can benefit from new infusions of money.

By making permanent and expanding existing benefits like the EITC across both the federal and state levels, all eligible families could see direct cash payments that can help fight economic insecurity by offsetting some of the costs associated with food, housing, education, and more.

Let’s envision how the EITC would benefit the country at large if more eligible filers were aware of and or claimed the credit:

Three Things That Would Happen if More Eligible Filers Claimed the EITC

  1. More Americans could enjoy increased economic security. According to the International Labor Organization, “economic security is defined by access to basic needs infrastructure pertaining to health, education, dwelling, information, and social protection.” For basic security, “level of income, assurance of receipt, and expectation of current and future income,” is considered essential. The EITC provides substantial support to low- and moderate-income working families and is one of the most successful anti-poverty tools this nation has to offer. Notably, the EITC and the Child Tax Credit (CTC) were responsible for the overall monthly poverty rate falling from 14.4 percent in February 2022 to 10.8 percent in March 2022. In 2018 alone, the EITC lifted 5.6 million people out of poverty.

    Workers who claim the EITC also receive credit equal to a percentage of their earnings. Credits vary by family size, so larger credits are available to families with more children, and aim to alleviate some of the costs associated with necessities like groceries, transportation, housing, childcare, medical expenses, and utilities. So, not only does the EITC incentivize working people to build savings, but the credit also helps workers establish more financial stability.

  2. An uptick in academic performance and access to education. The last few years have seen a  decline in academic performance among low-performing students across the country. However, researchers who analyzed data for grades 3-8 from a large urban school district linked additional income from the EITC and the CTC with significant increases in students’ test scores.  In general, children from families receiving the EITC score higher on tests, especially in math, as compared to children from similar families whom, according to the Center on Budget and Policy Priorities (CBPP), are not targeted for large credit expansions. Children from families receiving the EITC are also more likely to graduate from high school, enroll in college, and earn more when they enter the workforce. This ensures that students who thrived because of the EITC have the means to set their own children up for academic success.

    As stated by CBPP, “A credit that’s worth about $3,000 (in 2005 dollars) during a child’s early years may boost his or her achievement by the equivalent of about two extra months of schooling.”   

  3. The American economy would be fueled. As a powerful anti-poverty tool, the EITC encourages and increases workforce participation. If low-wage workers are compelled to earn and gain more, they have better access to additional education or skills training to boost their earning potential. If they are able to find and accept new jobs that match their new skill sets, this growth can lead to a virtuous cycle where more jobs lead to more spending, which drives greater demand for goods and services, fueling economic growth. This increase in GDP expands economic growth and strengthens fiscal conditions overall.  And, for every EITC dollar a recipient earns, they return $1.50 – $2 to the economy. This type of return doesn’t just benefit their families, but it also benefits communities.

The EITC brings people a step closer to experiencing economic liberation. Empowering workers, families, and their children with the resources needed to meet basic needs, affords them the time, tools, and opportunities needed to secure economic freedom and to thrive. By understanding the possibilities of this greater adoption, more people may be incentivized to claim the EITC, bringing us one step closer to redefining freedom in the U.S. for the betterment and liberation of every person across the nation.