New Analysis Shows EITC Expansion Would Strengthen Credit for Childless Workers

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  • March 19, 2014

By Jane Williams and Elizabeth Kneebone

For low-income working families, the Earned Income Tax Credit (EITC) is one of the nation’s most effective tools for reducing inequality and alleviating poverty. However, for low-income childless workers, the EITC is a weak or unavailable resource.

Recognizing the need to reform the EITC to better benefit childless workers, the Obama administration recently released details for how it would go about expanding the EITC. The administration’s proposal joins others from officials in both the House of Representatives and the Senate including Representative Richard Neal’s Earned Income Tax Credit Improvement and Simplification Act of 2013 and the Working Families Tax Relief Act of 2013 introduced by Senators Sherrod Brown and Richard Durbin.

Yesterday we released a new analysis estimating the impact of each of these proposals’ on low-wage workers at the state level and across the nation’s 100 largest metro areas using our MetroTax model for Tax Year 2012.

We found that:

  • Each proposal would significantly strengthen the credit for millions of workers.
  • At least 15 states would double the number of filers eligible for the childless worker credit.
  • Every major metro area would see thousands of workers benefit from an expanded EITC.

Our findings illustrate that the proposed EITC expansion would contribute a significant federal investment in low-wage workers as well as the communities in which they live. This is particularly important for our suburban poverty work.

For part of what makes the EITC effective as a poverty alleviation tool is its responsiveness to changes in the economic cycle (bolstered in recent years by targeted expansions) and to the changing geography of poverty in the United States.  As the low-income population rapidly suburbanized in recent years, so, too, did the geography of EITC recipients. Between Tax Year 1999 and Tax Year 2011, the number of filers claiming the EITC in the suburbs of the 100 largest metropolitan areas increased by 61 percent, compared to an increase of just 32 percent in the largest cities. In Tax Year 2011, 10.2 million suburban filers claimed the EITC for a total of $22.9 billion.

Modernizing the EITC by enacting the proposed expansions would ensure the credit is an effective work incentive and poverty alleviation tool for childless workers, many of whom reside in suburban communities that are otherwise ill-equipped to address growing need.

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