In my first year as a social worker, I learned something that has informed my work ever since: refundable tax credits, like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) are incredible tools to reduce poverty and income inequality. In fact, the EITC is the largest, most effective federal anti-poverty program for the non-elderly. In 2012, the EITC lifted the incomes of over 4 million women and children above the poverty line.
Refundable tax credits like the EITC provide an infusion of cash at tax time that helps families pay down debt, cover major expenses like car repairs, and otherwise make up for all those other months when—no matter how many corners they cut—ends just don’t quite meet. For my clients, it was a once a year lifesaver.
Today is EITC Awareness Day. In honor and recognition of the significant difference that refundable tax credits have made in the lives of low-income women and their families for almost four decades, here are four important things to know:
- The EITC encourages work, especially among low-income single mothers. This means more income for families in the short-term, and higher wage growth [pdf] and a more secure retirement in the long-term.
- Refundable tax credits like the EITC improve health and educational outcomes for children. Specifically, low-income kids whose families receive refundable tax credits are more likely to attend college and have higher earnings themselves [PDF].
- The EITC provides targeted benefits to families who need help making ends meet. If workers’ income declines because of periods of unemployment or unpaid leave in a particular year, the EITC can help soften the financial impact of these economic “shocks.”
- Particularly when combined with antipoverty policies [PDF] like increases to the minimum wage, refundable tax credits like the EITC play an important role in increasing the economic security of women and their families.
The EITC has made a difference in the lives of millions of women and their families. That’s why NWLC and its partner organizations are working to ensure that refundable tax credits help as many families as possible. Despite the enormous benefits that these tax credits provide, year after year 20 percent of eligible recipients fail to claim them. Please help us get the word out about these important tax credits!