IMPACT MATTERS

The federal Earned Income Tax Credit (EITC) is a refundable tax credit that reduces the taxes (such as payroll taxes) that low-income working people pay and also supplements the wages of low-income workers. Enacted in 1975, the then very small EITC was expanded in 1986, 1990, 1993, and again in 2001. Today, the EITC is one of the largest anti-poverty tools in the United States, enjoys broad bipartisan support and has done more to reduce poverty, particularly among children, than any other tax incentive or social policy.

Each year, the federal EITC raises approximately 4.4 million people out of poverty, including 2.4 million children. In Utah, more than 130,000 households claim the EITC each year, bringing over $220 million into our economy. It is easy to see how the EITC is both a key support for struggling families and a tremendous economic development tool.

A number of states have enacted a state Earned Income Tax Credit that supplements the federal credit and works as a rebate for state taxes paid by low-income working people. Eighteen states plus the District of Columbia offer a state EITC, which is often a percentage of the federal credit.

A state EITC can stimulate the economy at the state and local levels by providing significant relief to low-income working families, who then spend their money locally. A state EITC can also raise parental employment levels, lift family incomes, and improve school achievement for elementary school and pre-school-age children according to new evaluations of welfare reform programs that include employment-based fiscal incentives like the EITC.

United Way of Salt Lake strongly supports the creation of a state EITC as an important tool to strengthen family financial stability and reduce poverty in Utah. To learn more, visit www.utahsaves.org or call 2-1-1.