Facts About the EITC
The Earned Income Tax Credit (EITC) provides tax relief to moderate and lower-income individuals and families. It can provide a cash refunds even to those that do not owe any federal taxes.
The EITC is the largest federal aid program targeted to the working poor*
The EITC was enacted in 1975 as a temporary measure. Since that time it has become a permanent part of the tax code and has grown from a modest tax refund effort to a $30 Billion annual outlay designed to help low-wage working people.
The EITC helps can help individuals build their assets
Studies have shown that that refunds are used in a variety of ways, from payment of bills - especially rent and utility bills - to starting checking or savings accounts. Indeed, when paired with an IDA program, refunds can quickly build assets.
The EITC has a Substantial Impact on the Local Economy
In 1998, the EITC
brought $122 Million in refunds to the Nashville MSA. Assuming that only about
80% of those eligible actually file, $30 Million was left on the table.
Another
way to consider impact is to look at the average refund, which is expected to
be about $1,600 this year. If we get just 100 new filers this year, we add $160,000
to the economy; 1,000 new filers add $1.6 Million.
Immigrant workers may qualify for the EITC
Nashville is a diverse city with a surprisingly large immigrant population. Research has found that the households least likely to file for the EITC are often those that face language barriers. But many immigrant workers may qualify for the EITC if they have a valid social security number.
The EITC does not affect welfare benefits
In most cases, refunds received do not affect eligibility for benefits like cash assistance (TANF), Medicaid, Food Stamps, SSI, or public or subsidized housing.
Eligible workers are not claiming the credit
Studies have shown that that a number of eligible households, especially families with very low incomes, former welfare recipients, and those with language barriers are not filing.
* See Berube and Forman, A Local Ladder for the Working Poor: The Impact of the Earned Income Tax Credit in U.S. Metropolitan Areas, The Brookings Institution, September 2001.