State EITCs Can Help Advance Racial Equity

By Lauren Pescatore

State-level Earned Income Tax Credits (EITCs) are particularly effective programs for reducing poverty, especially among households of color, new research finds.

A report from the Carsey School of Public Policy at the University of New Hampshire explores the effects of state EITCs on rates of poverty from 2010-2014, finding that the credits lifted 0.7 percent of non-white or Hispanic-headed households out of poverty, compared to 0.2 percent of households headed by a white individual. The average state EITC benefit for households of color was $495, while the average benefit for white households was $375. What’s more, the findings show these credits are most effective at reducing poverty among children, particularly those in households of color.

Carsey’s findings are consistent with other recent research showing that state-level EITCs are linked to improved racial equity. A 2016 report from the Jesuit Social Research Institute at the Loyola University New Orleans College of Social Sciences found that states without EITCs ranked far lower in wage and employment equity between households of color and white households, as well as immigrant youth outcomes, than those with state-level EITCs.

On average, children of color begin life at a more disadvantaged starting point than their white peers, hindering their chances of reaching their full potential as adults. While the child poverty rate is alarmingly high across all races and ethnicities, as of 2016 the rate of poverty for black children (38 percent) and Latino children (32 percent) was nearly three times the rate for white children (13 percent). Enacting state-level EITCs and improving the federal credit can help to address the glaring racial disparities in child poverty rates and improve early outcomes for children of color so they are more likely to succeed as adults.

The full report from the Carsey School of Public Policy, “State EITC Programs Provide Important Relief to Families in Need,” is available here.