You’ve Heard About an Advanced EITC. But What About a Delayed One?

By Lauren Pescatore

Earlier this year, U.S. Senator Sherrod Brown (D-OH) unveiled the “Early Refund EITC”: a plan to allow eligible lower-income workers to access a portion of their Earned Income Tax Credit (EITC) in advance, as an alternative to more costly lending options.

Now, a group of academics has teamed up with the Corporation for Enterprise Development (CFED) to propose a “Rainy Day EITC,” which would allow recipients to defer collecting a portion of their credit until a later date. 

Here’s how it would work: Eligible workers could opt to only receive 80 percent of their credit at tax time and receive the rest, plus a 50 percent savings match, six months later. A typical low-wage family’s $2,500 EITC could become a $2,700 Rainy Day EITC – with $2,000 collected at tax time and an additional $700 collected later in the year. For those living paycheck-to-paycheck, that extra $200 could mean the difference between making a bill payment on time and evading eviction – or not.

The proposal’s architects estimate a total cost for the Rainy Day EITC of just about 1 percent of the entire EITC program – an inexpensive investment that would provide an additional financial cushion against future expenses and an opportunity to save for a more secure future.

Learn more about the proposal here.