The Top 6 Reasons Your State Should Enact an EITC (If It Hasn’t Already)
We all know the Earned Income Tax Credit (EITC) is one of the best poverty-fighting tools around. Here are six more reasons that your state should adopt an EITC of its own, or expand the one it has:
- It’s one of the best ways to reduce income inequality. According to the Institute on Taxation and Economic Policy, nearly all states have a regressive tax system, meaning those earning very little pay a larger percentage of their incomes in taxes than wealthier households. A recent study by the Federal Reserve Bank of Boston found that state EITCs play a major role in leveling the playing field by helping low-wage workers keep more of what they earned.
- It is especially beneficial to children. Just like the federal EITC, which lifted 6.2 million people out of poverty in 2013 – more than half of them children – state EITCs are one of the best ways to keep children from living below the poverty line. The credit is also linked to improved maternal and infant health, better school performance, and greater college enrollment among children in families who receive it.
- It boosts workforce participation. Numerous studies show that the EITC encourages work, particularly among single mothers and female heads of households. Most recipients only claim the credit for a short period of time, typically around two years, until they’ve built enough experience to advance to a higher-paying job.
- Small businesses and your local economy would benefit. Even conservative estimates show that for every dollar spent to fund a state EITC, $1.50 is returned to the local economy. Most EITC recipients spend their credit at local businesses on items such as groceries and car repairs.
- The credit enjoys bipartisan support. At the state and federal level, both Republicans and Democrats back the EITC as one of the most effective ways to reduce poverty and income inequality.
- Everyone else is doing it! Twenty-five states and the District of Columbia offer their own version of the federal EITC. Even through recessions and budget shortfalls, most states have retained their EITCs and continue to grow them in size.
Convinced yet? To learn more about how advocacy groups have run successful campaigns to enact or expand EITCs in the past, check out our state EITC case studies and guide to EITC advocacy here.