Press Release
CSS Report recommends expanding the Earned Income Tax Credit to ensure an equitable and inclusive recovery
The Earned Income Tax Credit (EITC) is the largest and most important means-tested cash transfer program in the United States. Since its inception in the 1970s, the EITC has proven to be an effective and impactful anti-poverty tool, particularly for low-wage households led by people of color. Every year, approximately 1.5 million New Yorkers claim a total of nearly $5 billion a year in city, state, and federal EITC.
A new Community Service Society (CSS) report, Make Work Pay Again: An Argument for Expanding the Earned Income Tax Credit (EITC), takes an in-depth look at the tax credit -- from its design and history to gaps in its reach and implementation -- to argue that an expansion of the EITC would offer a straightforward and just way to address racial/ethnic and economic inequities that have been worsened during the pandemic. Notably, as part of his recent `State of the City’ address outlining his funding priorities, Mayor Adams announced that he would invest $250 million to expand the City EITC.
One way to capitalize on the full potential of the tax credit as a powerful lever to support the city’s low-income families would be to consider raising the credit available to childless working adults as well as to taxpayers filing with an Individual Taxpayer Identification Number (ITIN). Earlier this month, the Governor and State Legislature passed a budget that included a temporary expansion in State EITC (from 30 percent to 37.5 percent of the federal EITC) and expansion of the City EITC (from 5 percent to 30 percent of the federal EITC on a sliding scale basis). However, the budget stopped short of extending the EITC to childless working adults, youth, elderly workers and ITIN filers.
“The Earned Income Tax Credit has a proven track record of helping New Yorkers move out of poverty and improve their economic situation,” said David R. Jones, CSS President and CEO. “We applaud the Mayor for including EITC expansion in his executive budget. Together with recent action by the State to widen the tax credit’s impact, it is a positive development for vulnerable workers who face an uncertain economic future.”
“The EITC is cleverly designed as a ramp to economic security for low-income individuals and families,” said Debipriya Chatterjee, Senior Economist at CSS and author of the report. “It is time to make this program available to some of our hardest working immigrant workers by making ITIN filers eligible for the credit.”
“This report unequivocally establishes the power of the EITC program,” said Emerita Torres, CSS Vice President of Policy Research and Advocacy. “The expansions included in the State budget and the commitments from Mayor Adams are great first steps. We hope this momentum continues and we see an expansion of the credit for childless working adults in the recent future.”
“This report highlights just how important the Earned Income Tax Credit is to millions of families in this country,” said David Dyssegaard Kallick, Director of the Immigration Research Institute. “And it shows how relatively modest changes could make a huge difference in people’s lives. We could take a program with a proven record of success and make it work for everyone by expanding the benefits to immigrant families who file taxes using ITINs, improving the treatment of workers who don’t have children, and increasing the level of support.”
“CCC applauds the Community Service Society for this analysis of EITC history and impact, and we support this call to action to create a more inclusive and impactful EITC," said Jennifer March, PhD, Executive Director of Citizens' Committee for Children of New York. "We know the COVID-19 pandemic has had a devastating and disproportionate impact on low-income households, immigrant households, and women of color. Fortunately, we have clear evidence that the EITC has a significant return on investment for households, for communities and for the economy. We have an opportunity to build on the anti-poverty progress achieved through the EITC by making permanent the deeper credit on the state and city level as well as expanding eligibility to include childless adult households and ITIN tax filers. These changes would ensure incomes can be lifted for young adults, non-custodial caregivers, and immigrant households; and would advance a more equitable recovery."
It is estimated that in New York, EITC helps reduce overall poverty by 0.8 percentage points and the share of children in poverty by 1.8 percentage points. As a poverty fighting measure, the EITC is a rarity in that it enjoys bipartisan support for its positive impacts on alleviating poverty, encouraging work, bolstering children’s educational attainment and on families’ physical and mental well-being.
Below is a summary of key findings and report recommendations:
Key Findings
- EITC is a powerful anti-poverty tool. Nationally, the EITC lifted about 5.6 million people out of poverty in 2018, including about 3 million children. In addition, the EITC reduced the severity of poverty among 16.5 million people in 2018.
- EITC has been shown to encourage work and increase effort. There is a rich literature of studies showing that EITC encourages work. The EITC has been shown to be especially effective at encouraging work among single mothers who work in jobs that pay low wages.
- EITC has been shown to improve long-term outcomes in recipients’ children. When families receive the EITC, their children have better economic, educational, and earning outcomes. The poverty alleviating effects of EITC continue as improved physical and mental health, higher educational attainment, and higher earnings in adulthood.
- EITC has been shown to contribute to stimulating the local economy. Recipients of the tax credit often spend their tax refunds locally, thus benefitting local businesses and accelerating the pace of economic recovery.
Key recommendations
- Expand EITC refunds at the state and city levels.
- Expand the credit amount available to childless working adults under EITC.
- Redefine eligibility criteria to extend EITC to taxpayers filing with a Taxpayer Identification Number (ITIN).
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The Community Service Society of New York (CSS) has worked with and for New Yorkers since 1843 to promote economic opportunity and champion an equitable city and state. We power change through a strategic combination of research, services, and advocacy to make New York more livable for people facing economic insecurity. By expanding access to health care, affordable housing, employment opportunities, debt assistance, and more, we make a tangible difference in the lives of millions. Join us at www.cssny.org.