Support Young Workers by Expanding the EITC in Next COVID-19 Package

By Whitney Bunts and Ashley Burnside

As the COVID-19 pandemic and resulting economic crisis continues, Congress must pass another legislative package that supports workers and families. On July 27, Senate Republicans rolled out the Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act, a $1 trillion relief package. The House passed a $3 trillion relief bill in May, the Health and Economic Recovery Omnibus Emergency Solutions (Heroes) Act, which, among other provisions, supported people with low incomes by expanding the Earned Income Tax Credit (EITC) for adults without children in their household. However, the Senate’s HEALS Act does not include an EITC expansion, despite the positive outcomes such a change would have for workers and local economies. The HEALS Act is woefully inadequate to support individuals with low incomes—specifically young people—for the duration of the economic crisis. Increasing the EITC refund available to workers without children in the household, as was included in the House-passed Heroes Act, is an important policy to support these youth and young adults during the economic crisis.

The COVID- 19 pandemic continues to put a financial strain on countless Americans -- with many businesses and employers still closed or only able to offer a reduced number of hours to employees. Even before the pandemic, young adults were struggling and faced structural barriers including high poverty rates, food and housing insecurity, and disproportionately working in sectors like hospitality and retail in jobs that pay lower wages. For instance, young adults (ages 18-24) had one of the highest poverty rate across all age ranges in 2018. Asian, Black, and Hispanic young adults experienced disproportionately high rates of poverty when compared to white young adults. However, the onset of COVID-19 has exacerbated these numbers. In the last three months, the unemployment rate for youth and young adults (ages 16-24) almost doubled, climbing to 25 percent.

The EITC is an effective anti-poverty tool with long-time bipartisan support that helps individuals and families afford basic necessities, reduces evictions, and infuses money into local economies. However, the current version of the EITC has a very small benefit, only about $500, for workers without a child living in the household, and is only available to workers without dependent children if they are between the ages of 25 and 64. Moreover, the EITC benefit phases out even before workers’ earnings have reached the poverty line, despite their still having to pay income tax. As a result, nearly 6 million workers without dependents, including 2.6 million young adults, are taxed into, or deeper into poverty.

The House-passed Heroes Act would temporarily expand the eligibility for childless workers to encompass those between 19 and 66 (with the exception of college students, who would become eligible at the age of 25). The Heroes Act would also temporarily expand the EITC refund to a maximum of $1,438 for childless workers. Because of both changes, this bill will allow 3.5 million young adults workers to receive the EITC. As we explain in a new brief, expanding the EITC through these policy changes will help reduce poverty and promote economic opportunity for young workers.

Before the pandemic, many were still recovering from the Great Recession, barely able to provide for themselves and their families. Now, all of that hard work has been disrupted – leaving many uncertain of their futures and their ability to attain economic security. Congress must do much more to help young adults overcome this time of unprecedented hardship. Temporarily expanding the EITC for workers without dependent children through the Heroes Act is the first step; but expanding the EITC for this population permanently would show a true investment by lawmakers in the future of our young people.