The Center on Budget and Policy Priorities is highlighting new research on the federal earned income tax credit (EITC) showing that the credit serves most recipients as a short-term safety net rather than a long-term income support.
The federal EITC goes to working people with incomes under $50,000, with the exact credit amount varying according to family size and annual earned income. The new study looked at EITC usage and participation patterns from 1989 to 2006. Among its conclusions:
• About 50% of all taxpayers with children used the credit during the 18-year period.
• 61% of those who claimed the credit did so for two years or less (42% for only one year).
• Only 20% of EITC claimants used the credit for five years or more.
• EITC use is highest when children are young, which also tends to be when parents’ wages are lower.
“Income Mobility and the Earned Income Tax Credit” appears in the September 2011 issue of Public Finance Review.
In 2011, Connecticut adopted a state EITC for low-income people and families. The new credit against the state income tax is equal to 30% of the federal EITC amount the person claims.
