What Congress needs to know about America’s invisible anti-poverty program

One of the most effective anti-poverty programs in the United States is nearly invisible. You can see the woman at the grocery store hand the cashier her SNAP card (formerly food stamps). You may know which houses in your neighborhood accept Section 8 housing vouchers. But, you probably don’t know that the barista serving your morning coffee gets a check from the IRS every tax season. 

Your barista and over 27 million Americans every year benefit from the Earned Income Tax Credit (EITC). The EITC is a refundable federal tax credit; if the credit is more than what a worker owes in taxes they get the difference in a refund check.  Most people get it in February, March, or April, when they do their taxes.

{mosads}As a professor at a public university in Ohio, I see my students doing everything they can to improve their lives and help their families get ahead. The majority of my students are first-generation college-goers. Many of them work all day, go to school at night, and take care of their children to boot. Yet, on top of their work and studies and families, many of them are hungry. They are worried about where to sleep that night. They know one car repair bill would prevent them from being able to afford a jacket for their five-year old son to protect him from the cold Cleveland winter.

I study inequality every day, and I have found that programs like the EITC can make a significant difference in the lives of American families, like those of my students. 

The EITC incentivizes work by increasing as an individual’s income increases – as they work more hours or move up the job ladder. The credit also increases based on number of children. The amount can range from a couple of hundred dollars to a few thousand. 

Researchers like me have analyzed the EITC, and our findings are striking. The EITC reduces poverty for working families, decreases income inequality, and gives workers money they tend to spend on things they need, like winter jackets and car repairs.  It also improves health indicators. To name but two examples, receiving the EITC is associated with lower smoking rates and higher birth weights for new babies.   

No program is perfect, but the Earned Income Tax Credit is one of the best tools we have for making work pay. Members of Congress should keep this in mind as they consider whether or not to extend the EITC expansions in the American Recovery and Reinvestment Act. 

Under the Act, EITC benefits were increased for working low-income families with more than two children. The marriage penalty, which severely limited benefits for married parents, was reduced. (This meant that working families would not have to choose between getting the assistance they need for their family and getting married.) 

Without further action, these new policies will expire in the end of 2017, decreasing benefits for 6.3 million families, representing 27 million Americans, including 14.6 million children.

But Congress has the opportunity here: they can choose to make these tax benefits permanent. By making the Earned Income Tax Credit extensions permanent, millions of Americans, including many of my students, can get the help they need to make ends meet. They are not asking for a handout. They are asking for a tax supplement to the wages they earn. They just need a little help so they can support their families.

Hatch is an assistant professor of Urban Policy and City Management at Cleveland State University and a member of the Scholars Strategy Network.