The Many Strengths of the EITC – and Relevant Policy Priorities for 2012
This is the final installment of our week-long series on the Earned Income Tax Credit to celebrate EITC Awareness Day today. We hope you enjoyed it!
The many strengths of the EITC – and relevant policy priorities for 2012
The Earned Income Tax Credit is probably best known for boosting working families’ earnings and lifting about 6 million households from poverty every year. But as a new paper from the National Community Tax Coalition notes, extensive studies demonstrate that the credit’s values also extend to strengthening:
- Children’s education outcomes – an EITC increase of even $1,000 in family incomes can help raise math and reading test scores by a statistically significant amount.
- Families’ health outcomes – states with their own EITCs see higher baby birthweights and lower incidences of maternal smoking.
- Local economic vitality – a number of “multiplier effect” studies have concluded the EITC bolsters neighborhood businesses in ways that help whole communities to thrive.
“The EITC: Good for Our Families, Community & Economy” highlights some of the research behind these and other significant facets of the credit – research that, in many cases, has appeared in Tax Credits for Working Families over the last couple of years.
All these findings are important to keep in mind as EITC Awareness Day approaches on Jan. 27, as tax-filing season kicks off – and as Congress prepares for another year of policymaking.
Appropriately, the NCTC paper lays-out several policy priorities for 2012, including the needs to:
- Maintain important improvements in the EITC for married couples and for families with three or more children. Without Congressional action, these improvements will end with the Dec. 31 expiration of American Recovery and Reinvestment Act extensions.
- Defend state EITCs from cuts, strengthen them and create new ones in states that lack them. These critical state credits piggyback on and add to the value of the federal EITC.
- Sustain and boost Volunteer Income Tax Assistance (VITA) services, which help low-income, working families connect with the EITC help they need but might otherwise miss. Legislation known as the VITA Act – S.816 and H.R.2151 – would bolster resources for these critical services over five years, as well as strengthen quality-assurance efforts.
Without attention to such policy detail, the credit’s many research-proven, societal benefits are at risk of erosion. And that erosion starts with the effects felt by individual families, such as those from two Wilson, North Carolina households who described the EITC’s significance in the new NCTC paper.
“It means a new pair of shoes or much-needed medicines,” said a mom from one family. “Buy groceries, put clothes on our backs, fill our gas tank up in our car, pay rent and other bills, pay medical bills and help with home repairs,” added another.
Judging by its effects on individual families and its impacts on entire communities, there’s obviously a lot riding on the EITC. So let’s keep it strong for those who need it, today and tomorrow.
By Sean Noble, Director of Public Policy & Research