The Earned Income Tax Credit (EITC) is a federal tax credit for low- and moderate-income working people, recognized for its success in promoting work and alleviating poverty as well as offsetting payroll and income taxes. Due to its success, federal policymakers over the last decade have made considerable progress in strengthening the EITC. The progress made at the federal level translates to nearly $2.5 million returned to 300,000 EITC recipients in Arkansas, and $2.75 million back in the pockets of 392,000 Mississippians in 2012.
Southern also recognizes the importance of the EITC. As part of our mission to create economic opportunity in the rural communities we serve, Southern has helped file more than 15,000 tax returns over the past decade through our Volunteer Income Tax Assistance (VITA) program, resulting in over $15 million in refunds from the EITC alone. That’s money being directed back into the community, strengthening the local economy.
However, in spite of the great assistance the EITC has brought to many Arkansas and Mississippi families, low-income childless workers receive little to nothing from the EITC. For instance, a childless adult working full time at the minimum wage cannot qualify for the EITC because his earnings exceed the income limit for the very small credit for workers not raising minor children. Further, all childless workers under age 25 are ineligible for the EITC, so young people just starting out receive none of the EITC’s proven benefits.
In an effort to expand the poverty-reducing impact of EITC, the President’s 2015 budget and five recent congressional proposals would significantly improve the EITC for childless workers. Nearly all of the proposals would lower the eligibility age to 21, and all would raise the maximum credit and phase in the credit more rapidly as a worker’s income rises. If the President’s 2015 budget proposal passed:
- The credit for a childless adult with wages at the poverty line would rise from $171 to $841;
- the credit would jump from just $22 to $542 for a childless adult working full time at the minimum wage; and,
- 122,000 childless workers in Arkansas and 129,000 childless workers in Mississippi would become eligible for the EITC or receive a larger EITC in 2015.
By making more childless workers eligible for the EITC — including those working full time at the minimum wage — and increasing the credit for workers currently eligible, the tax credit will provide more support for increasing employment and reducing poverty. In the communities Southern serves in Arkansas and Mississippi, the expansion of the EITC could be transformative as both states have high percentages of residents living below the poverty level. A substantial transfer of wealth, such as the EITC, can positively affect one’s net worth, thereby providing opportunity for upward economic mobility, which is why we encourage you to contact your elected officials and ask them to support these changes.
As a Community Development Financial Institution (CDFI), Southern is committed to improving the financial stability of rural communities, and supporting common sense measures like the EITC that provide proven incentives to work and earn wages rather than rely on public benefits. We invite you to learn more about our efforts to improve the economic security of rural communities and the people who live there at any time by contacting Meredith Covington, Policy & Communications Manager, at meredith.covington@southernpartners.org.
Carsey Institute. (2014). Proposed EITC expansion would increase eligibility and dollars for rural and urban “childless” workers. Available at http://carseyinstitute.unh.edu/sites/carseyinstitute.unh.edu/files/publications/IB-Carson-Mattingly-EITC-2014-web.pdf.
National Conference of State Legislatures (NCSL). (2012). Available at http://www.ncsl.org/research/labor-and-employment/earned-income-tax-credits-for-working-families.aspx.
The Working Families Tax Relief Act of 2013 (S. 836), introduced by Senators Sherrod Brown and Richard Durbin; The Earned Income Tax Credit Improvement and Simplification Act of 2013 (H.R. 2116), introduced by Rep. Richard Neal; The EITC for Childless Workers Act of 2014 (H.R. 4117), introduced by Rep. Charles Rangel; The Julia Carson Responsible Fatherhood and Healthy Families Act of 2013, introduced by Rep. Danny Davis; and The 21st Century Worker Tax Cut Act (S. 2162), introduced by Senators Patty Murray, Jack Reed, and Sherrod Brown.
Center on Budget and Policy Priorities (CBPP). (2014). Available at http://apps.cbpp.org/3-5-14tax/?state=AR and http://apps.cbpp.org/3-5-14tax/?state=MS.