Earned Income Tax Credit Awareness Day: Strategies to Promote Work and Reduce Inequality

By Lavanya Mohan and Helly Lee

Just days before National Earned Income Tax Credit (EITC) Awareness Day, President Obama spoke on the effectiveness and impact of the EITC in his State of the Union Address. In his address, he highlighted that:

“There are other steps we can take to help families make ends meet, and few are more effective at reducing inequality and helping families pull themselves up through hard work than the Earned Income Tax Credit…It helps about half of all parents in America at some point in their lives.”

One of the nation’s largest, most effective anti-poverty programs, the EITC supplements earnings and encourages work among low-wage earners. In 2012, the EITC lifted 6.5 million people, including 3.3 million children, out of poverty, while also reducing its severity for an additional 8.3 million children.

The President further discussed expanding the credit for low-income workers who do not have minor children. While the federal government has yet to adopt such a program, the City of New York has already done so. Last year, the city announced an EITC pilot program for childless workers to fight poverty and promote work among adults without dependents, including noncustodial parents. The four-year pilot program will offer up to $2,000 in refunds for three consecutive years to participants earning $26,000 per year or less. The program has strong potential to reduce inequality for single workers by promoting work, financial security, and stability for children.

Other strategies may include allowing individuals to access EITC payments to meet their ongoing needs throughout the year, as opposed to waiting for an annual refund payment. The city of Chicago recently announced plans for a pilot program that would allow EITC recipients advanced access to a portion of their tax credit dollars through quarterly payments in 2014.

The EITC is an effective anti-poverty measure that encourages work, boosts local economies, and promotes financial stability for individuals and families. It has long received bipartisan support and can be further strengthened to serve low-wage workers. National EITC Awareness Day is a time to reflect on the good this program does, while working to increase access with the potential to help millions more people.