Washington, D.C. — New reports released today by the Center for American Progress and Generation Progress propose bold new ideas for strengthening and leveraging anti-poverty tax credits such as the Earned Income Tax Credit, or EITC, to promote financial stability and economic mobility for more Americans, including young and childless workers.
“The Earned Income Tax Credit is one of our nation’s most effective anti-poverty tools, but more can be done to leverage its economic power and ensure that more Americans can access economic and educational advancement,” said Rebecca Vallas, Associate Director of CAP’s Poverty to Prosperity Program and the lead author of the report.
“Paired with a much-needed and long-overdue increase in the national minimum wage, strengthening the EITC is a common-sense proposal that should win support on both sides of the aisle. CAP’s proposal would make saving more accessible for working families, provide an alternative to predatory loans, and put education and training within closer reach for workers seeking to get a leg up in the labor market,” said Melissa Boteach, Vice President of the Poverty to Prosperity Program at Center for American Progress and a co-author of the report.
CAP’s new report notes that the EITC has enjoyed broad bipartisan support throughout its history, with Republicans and Democrats alike praising the program for its effectiveness at reducing poverty for working families. More than 6.5 million Americans, including 3.3 million children, avoided poverty in 2012 thanks to the EITC. Given the EITC’s effectiveness as an anti-poverty tool, CAP offers new policy solutions that harness the EITC as a tool for financial empowerment and upward economic mobility.
These solutions include:
- Strengthening the EITC as an asset-building tool for families who wish to use their tax refunds to build savings
- Creating an early-access provision that allows workers to access a small portion of their EITC ahead of tax time so they do not have to rely on predatory lending products and can take advantage of mobility-enhancing opportunities
- Harnessing the EITC to increase access to higher education and training through categorical eligibility for the maximum Pell Grant and reforms to strengthen the American Opportunity Tax Credit
CAP’s new policy solutions build on existing proposals to strengthen the EITC and Child Tax Credit, or CTC. These recommendations include making permanent the improvements enacted as part of the stimulus package; enhancing the EITC for workers without qualifying children; lowering the minimum age for EITC eligibility; and making the CTC fully refundable and tying its value to inflation.
In conjunction, Generation Progress argues in a new report that the EITC should be expanded to include more young and childless workers. A higher percent of Millennials live in poverty today, regardless of education, than the immediate previous generation at a similar point in their lives. The EITC, however, excludes young and childless workers.
“While the Earned Income Tax Credit has effectively lifted many low-income Americans out of poverty, young and childless workers are sadly left out from accessing the full benefits,” said Sarah Audelo, Policy Director for Generation Progress and a co-author of the report. “Expanding the EITC to include these young adults will help a generation of workers get a foothold in the labor market. It is a common-sense policy that will help Millennials achieve a fair shot in today’s economy.”
In particular, the Generation Progress report encourages lawmakers to expand the EITC by lowering the eligibility age for childless workers to 18 years old and utilizing the EITC to trigger student loan assistance.
Click here to read “Harnessing the EITC and Other Tax Credits to Promote Financial Stability and Economic Mobility” by Rebecca Vallas, Melissa Boteach, and Rachel West at the Center for American Progress.
Click here to read “A Ladder Up: Why Young and Childless Americans Are Excluded From The Earned Income Tax Credit And How We Can Expand It” by Gurwin Ahuja and Sarah Audelo at Generation Progress.
To speak to an expert from CAP’s Poverty to Prosperity team, contact Allison Preiss at gro.ssergorpnacirema@ssierpa or 202.478.6331.
To speak to an expert from Generation Progress, contact Jamal Little at gro.ssergorpnacirema@elttilj or 202.741.6251.