What the EITC tells us about family economic security

Nov 04, 2011

By Jenice R. Robinson

A recent report about the Earned Income Tax Credit (EITC) tells us a lot about economic insecurity and fluidity of family income.

Researchers from the Joint Committee on Taxation and Ball State University found that over an 18-year span, half of all families with children used the EITC at least once. About 61 percent of taxpayers claiming EITC did so only for short periods of one or two years, while just 20 percent relied on the credit for spells lasting five years or more.  

This is consistent with existing data and what we know about income and poverty overall. At any given moment in time, a family may have income considered above the federal poverty threshold, but events such as job loss, taking unpaid time off work after the birth of a child, major medical bills, or any number of unforeseen circumstances could cause a family to fall into poverty or move from middle class to low-income or working poor. The 2010 Census report on poverty and income noted that nearly one-third of the population lived in poverty for at least two months from 2004 to 2007.

Over the last couple of years, with high unemployment and rising poverty, public focus on economic inequality and the shrinking middle class has intensified. We are seeing that magnified even more in recent weeks. This is progress, but the conversation should evolve to more broadly focus on family economic security and the role of public policy in providing a safety net as well as opportunity for families to thrive.

The EITC is the model of an effective safety net program that enhances family economic wellbeing.  It rewards work, acts as a short-term safety net for a large number of families, and provides long-term support for a smaller share of working families who are poor and low-income for an extended time. This is why it has received bipartisan support for two decades. 

Data and anecdotal evidence make it so painfully evident that prosperity is not shared and a large number of families are not secure in spite of our nation's core value that opportunity is out there for the taking. But it's also clear that public policy can help address this lack of security.

In 2010, EITC provided 5.4 million people, including 3 million children, with the resources to get out of poverty. Similarly, Unemployment Insurance kept 3.2 million out of poverty and Social Security kept 20 million people out of poverty, according to Census.  Other research shows that investments in education and workforce development improve outcomes for individuals. All this evidence helps make the case for public policies that continue to focus on family economic security, reducing poverty and strengthening the middle class. 

Much of the conversation in Washington these days is focused on pending recommendation from the Joint Select Committee on Deficit Reduction, the bipartisan committee tasked with cutting at least $1.2 trillion from the deficit over the next decade. No one is certain what those recommendations will look like, or if the committee will even be able to come up with a compromise in this divisive partisan environment. As they consider how to make the cuts, however, we recommend they strongly consider the health of the nation and its families and do no harm to vital programs that help alleviate poverty and promote family economic security. 

site by Trilogy Interactive