The Final State of the Union
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Summary:
Today is Earned Income Tax Credit (EITC) Awareness Day. Here's what you need to know and why you should care about the EITC.
It might not be circled on everyone’s calendar, but today marks an annual event that tax policy experts look forward to: Earned Income Tax Credit (EITC) Awareness Day.
The EITC is a tax credit that encourages and rewards work by reducing taxes and boosting incomes for low- and moderate-income workers. Today, there’s quite a bit to celebrate, as the President and Congress took an important step in December by making permanent vital expansions of the EITC and the related Child Tax Credit (CTC). But this year, we hope to go a step further – strengthening the EITC by enacting legislation that expands the credit for workers without dependent children, a policy that has significant support from both Democrats and Republicans.
If you were wondering why we celebrate EITC Awareness Day, here are a few key numbers worth knowing:
28 million
The number of working families that will benefit from the EITC in 2016, with each receiving a tax credit averaging more than $2,300.
13.2 million
The number of low-income workers who would be directly helped by the President’s proposal to expand the EITC for workers without dependent children.
As the President said in his State of the Union Address, he hopes to work with Congress this year to expand the EITC for these workers, who are currently the only group the federal government taxes into or deeper into poverty, partly because they are only eligible for a very small EITC under current law. The President and Speaker Ryan have nearly identical proposals that would roughly double the maximum EITC for this group and make single workers ages 21-24 eligible. The President’s proposal would also expand eligibility to workers age 65 to 66 without dependent children to match long-scheduled increases in the Social Security retirement age.
16 million
The number of working families who will benefit each year from the EITC and CTC expansions made permanent in the tax and budget legislation the President signed in December. These families will receive an average tax cut of about $900 each.
More than 9 million
The number of people the EITC and CTC lift out of poverty each year, making them one of the most successful tools in combating poverty. The EITC and CTC lift about five million children out of poverty each year – more than any other federal program.
17 percent
How much researchers estimate that earnings will increase in adulthood for children in low-income families, on average, if they receive a $3,000 annual income boost when they are young – similar to what the EITC provides many families. The EITC is also linked to better infant and maternal health and educational achievement.
7
The number of consecutive presidents who’ve signed an EITC expansion into law. The EITC has traditionally had strong bipartisan support: It was first enacted under President Gerald Ford in 1975, and has been strengthened under Presidents Jimmy Carter, Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama.
27
The number of states, including the District of Columbia, that have adopted a state-level EITC to supplement the federal credit and further boost working families’ incomes.
But there’s one last number that points to the reason for EITC Awareness Day: Just 80 percent of taxpayers who qualify claim the EITC. Although this is a relatively high take-up rate, it means millions of other eligible taxpayers miss out. So as we work together to strengthen the EITC, you can also find resources about how you or your organization can help ensure hardworking families claim the credits they’ve earned here.
Seth Hanlon is a Special Assistant to the President for Economic Policy. Jacob Leibenluft is Deputy Director of the National Economic Council.
