For decades, the Earned Income Tax Credit (EITC) has been widely hailed as one of the largest and most effective poverty-reduction programs in the United States, lifting millions of families with children out of poverty each year. However, up to 20 percent of families that qualify do not collect it. Hispanic families, in particular, have historically been the least likely to know about or receive the EITC even though, compared with their peers, low- income Hispanic families with children are more likely to have adult earners in the household. Now, new research from Duke University and Child Trends suggests that rates of EITC participation among Hispanic families are lower than previously thought. During the 2013 to 2015 tax years, 46% of Hispanic families received the EITC, compared to 55% of White and 58% of Black families.
Numerous studies have shown evidence of the program’s effectiveness, linking the tax credit to greater participation in the workforce, increased lifetime earnings, and improved child educational and health outcomes. Families receiving the EITC, conventionally as a lump sum payment when taxes are filed at the beginning of the year, report that the $3,500-4,000 boost in income helps in a variety of ways, including paying bills and making large purchases. Today, as policymakers continue debating over the next COVID-19 relief package, successful anti-poverty programs such as the EITC should remain front and center but also packaged with income supports that do not hinge on jobs or earnings given the losses incurred in 2020.
In the study released today, researchers leverage nationally representative data (called the Survey of Income and Program Participation) to examine how various state characteristics affect tax filings and EITC receipt among Hispanic families. They also gathered new detailed information across states about availability of state-level tax credits, marketing and information outreach about the EITC, and availability of information in the Spanish language. Findings further show how EITC receipt among Hispanic families with children appear responsive to state-level tax credits and certain outreach strategies.
- More generous refundable state EITC amounts. In 2015, 13 states and DC offered a more generous refundable state EITC in addition to the federal EITC (CA, CT, DE, IA, KS, MD, MA, MN, NJ, NY, VT, VA, and WI).
- Statutes requiring public benefit programs to inform recipients about the EITC. In 2015, only 8 states (AZ, CA, ME, MA, MI, MO, NJ, and TX) had such a statute.
- Statutes requiring employers to inform employees about the program. In 2015 only 5 states (CA, MD, NJ, TX, and VA) had such a statute.
- Information about the EITC available in Spanish. In 2019, only 18 states provided publicly accessible information about the EITC in Spanish alongside tax filing information on the administering agency’s website.
- A high density of free tax preparation sites. While all 50 states and Washington, DC have free tax preparation sites, availability varies. In 2019, DC had the highest density of free tax prep sites (27.9 per 100 square miles), and Alaska had the lowest (0.01 free tax prep sites per 100 square miles).
- Policies that allow unauthorized immigrants to obtain drivers’ licenses. As of 2015, 10 states (CA, CO, DE, HI, MD, NV, NM, UT, VT, WA) and the DC had such policies.
- A larger Hispanic share of the population. While it is not possible to individual examine the specific role of any one of the above policies, states with a larger share of the Hispanic population also tend to be states that have a bundle of the above statutes and practices designed to increase EITC participation. Examples of these states include California, Illinois, New Jersey, and New York.
“The Earned Income Tax Credit is the most robust anti-poverty program we have in the U.S. that supports children in poverty with working parents. As the economic fallout of the pandemic persists, our research points to the limited reach of the EITC for Hispanic families for two reasons,” said Lisa A. Gennetian, co-author of the study and Pritzker Associate Professor of Early Learning Policy Studies at the Duke Sanford Center for Child and Family Policy. “Their receipt of the EITC was low in the first place, lower than other eligible groups; and, second, the pandemic is hitting Hispanic families particularly hard by way of its health consequences but also because of barriers that Hispanic families particularly face in receiving any economic stimulus.”
This research was supported by the Robert Wood Johnson Foundation and William T. Grant Foundation.
Link to research brief: https://bit.ly/3lN4SY5
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