EITC at 50: A Rare Bipartisan Success Story
A recent panel hosted by the Brookings Institution marked the 50th anniversary of the Earned Income Tax Credit as a bipartisan success story that has lifted up millions of working families.
“EITC at 50 helps tens of millions of families and has done an awful lot of good,” said Jacob Bastian, a nonresident senior fellow at Brookings and assistant professor of economics at Rutgers University.
The EITC, the consistent bipartisan support for which seems like a relic from another age in today’s political atmosphere, was originally designed to target low-income working families with children, but has since expanded to include middle-income families and, on a much more limited basis, those without children.
The EITC works by reducing an individual’s tax liability, meaning that it reduces the amount of taxes owed. It is also refundable, so if an individual’s liability is smaller than their tax credit, they will receive the difference in the form of a refund.
About 23 million people received the EITC in 2023. The total cost of the program was $71 billion in that year and the average benefit is about $3,000 per year. Bastian said that 31 states, the District of Columbia and a few cities also add additional EITC benefits, providing a total tax credits package that can be worth more than $10,000 a year for working families.
In terms of poverty reduction, the program has been “wildly successful,” said Jim Sullivan, professor of Economics at the University of Notre Dame and Co-Founder and Director of the Wilson Sheehan Lab for Economic Opportunities (LEO.
Sullivan said that if EITC benefits were eliminated, poverty would rise by roughly 20%—the only programs that lifts more Americans out of poverty are Social Security, disability supports, and SNAP.
Hilary Hoynes, the Chancellor’s Professor of Economics and Public Policy at the University of California Berkeley, said more recent studies of the EITC have found that the program has wide-ranging benefits for the entire family, particularly children.
“In the short-run, things look better in the household,” Hoynes said. “Mom’s mental health is a bit better. There’s less evidence of housing insecurity. There’s shorter-term evidence of slightly better financial situations. There’s less violence.”
For children, Hoynes said there are also specific benefits. Births are healthier. Children’s health is improved and they do better in school. “We also see quite consistent evidence that children who throughout childhood have access to the EITC, their competed education is higher, their earning sare higher, their poverty rates in adulthood are lower,” she said.
“You can also think of this program as an investment in children,” Hoynes said. “The more you spend as children are young, the less you spend when children are older.”
In the reconciliation bill passed recently by the House of Representatives, the EITC would be changed to include some pre-certification requirements, which panelists in the Brookings session felt was largely unnecessary and potentially counterproductive.
“One of the long-runing benefits is that it’s (the EITC) run through the tax system and the administrative costs are really low,” said Sullivan. “I have a lot of concerns about turning the IRS into a welfare office to try to process who is eligible.”
At a moment when the vast majority of government programs are under attack, panelists held up the EITC as an enduring, bipartisan triumph.
Said Bastian: “We give people a big infusion of cash once a year and it does a lot of good.”