A HAND UP: How State Earned Income Tax Credits Help Working Families Escape Poverty in 2004

Publication Date: May 2004

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Joseph Llobrera; Bob Zahradnik

Research Area: Labor; Social conditions

Keywords: Economic projections; Household income; Income diversity; State budgets

Type: Report

Abstract:

Earned Income Tax Credits provide tax reductions and wage supplements for low- and moderate-income working families. The federal tax system has included an EITC since 1975, with major expansions in 1986, 1990, and 1993, and an additional expansion in 2001. In 2002, more than 21 million families and individuals filing federal income tax returns — nearly one out of every six families who file — claim the federal EITC.

The EITC has been widely praised for its success in supporting work and reducing poverty. The federal credit now lifts more children out of poverty than any other government program. Some 4.9 million people, including 2.7 million children, were removed from poverty in 2002 as a result of the federal EITC. The federal EITC also has been proven effective in encouraging work among welfare recipients; studies show it has a large impact in inducing more single mothers to work. Support for the EITC has come from across the political spectrum.