In new Urban-Brookings Tax Policy Center analysis of Earned Income Tax Credit (EITC) take-up at the county level, Benjamin Harris, a fellow in Economic Studies, and Research Assistant Lucie Parker use zip-code level data on taxes and demographics to take a "fresh look" at the EITC. "Since its creation in 1975," they write, "the Earned Income Tax Credit has played a major role in the U.S. safety net." Earlier this year, Harris presented EITC take-up using IRS data from 2007. Compare that to the new list of ten counties with the highest share of EITC recipients below:

"The regional variation EITC claiming is stark," Harris and Parker conclude. "The counties with the highest share of taxpayers claiming the EITC are overwhelming located in the Southeast. ... [O]ver half the taxpayers in a large share of counties in Alabama, Georgia, and Mississippi claim the EITC. With few exceptions, almost all counties with high EITC claiming are located in the South. Relative to the South, the Northeast and the Midwest have much lower claiming rates. Moreover, average EITC benefit closely follows the pattern for share of taxpayers taking up the credit: in counties where more taxpayers claim the credit, the credit is larger on the whole."

Visit this U.S. map interactive to get county level data on share of taxpayers claiming EITC as well as average EITC amount, in dollars, per county.

When California passed its 2016 budget late last month, it joined a growing list of states that have recently adopted or expanded state versions of the federal Earned Income Tax Credit (EITC). First enacted in 1975, the EITC has become one of the country’s most effective antipoverty programs. We estimate that the federal EITC keeps millions of individuals and children out of poverty each year, reducing the national poverty rate by several percentage points. Others have shown how the EITC creates a strong incentive to work and works as a powerful tool for reducing income inequality.

For an unmarried worker with one child in 2015, the federal EITC works like this: Up to her first $9,880 earned, the worker receives a tax credit equal to 34 cents on the dollar, for a maximum credit value of $3,359. The credit is reduced by 16 cents for each dollar earned beginning at $18,110, eventually phasing out at $39,100 in earnings. Phase-in and phase-out rates and ranges depend on a worker’s filing status and number of dependents claimed. Importantly, the EITC is refundable; a filer can still claim any credit in excess of her tax liability, contributing to refunds that can represent double-digit shares of annual income for lower-paid workers.

Of the 26 states and the District of Columbia with their own EITCs, most have structured their programs to mirror the federal EITC, by simply matching some percentage of the federal credit in a given tax year (see map). This year, Massachusetts, New Jersey, and Rhode Island all increased their state EITCs’ matching percentages. In three states, the EITC is non-refundable, making it a less effective incentive for very low-income workers (Maine this year made its credit refundable). California’s EITC joins a couple of others that, while still refundable, vary in the degree to which they mirror the federal credit based on filing status and income.

Through our work maintaining Brookings’ EITC Interactive, we hear regularly from stakeholders around the country engaged in efforts to expand the EITC and increase local participation to strengthen low-income families and communities. Although it is difficult to determine uptake rates locally, there are several factors associated with participation. Self-employed workers are less likely to claim the credit, as are workers with low English proficiency, and those who do not claim any dependents. The availability of tax preparation assistance tends to increase participation rates. For groups who hope to expand access to the EITC in their communities, these considerations are a good place to start.

To be sure, the EITC is not a silver bullet. Because it is explicitly tied to work effort, the credit does not support low-income families who can’t find work. And because states must balance their budgets, many have had difficulty sustaining their EITCs during periods of economic downturn. (Several of the recent state EITC expansions actually represent the restoration of benefits following drastic cuts during the Great Recession.) Additionally, the federal EITC and its state analogues provide only modest support to workers who do not claim any dependents on their tax return. As such, policy makers should consider state EITCs strong complements to other interventions, such as the growing number of increases in the minimum wage occurring in states and cities.

Nevertheless, the EITC remains one of the best tools we have to fight poverty. Despite bipartisan support for the federal EITC, it is unlikely to be expanded anytime soon. In that light, recent state EITC expansions may be helping to create a more responsive, sub-national safety net that better reflects a large and diverse nation where local priorities and needs differ markedly.

One in five tax filers in the United States claims the Earned Income Tax Credit—a refundable federal tax credit targeted to low-income working Americans that has proven to be one of the nation’s most effective anti-poverty policies. Last year, at tax time the average EITC filer claimed just over $2,400 through the credit.

However, the share of filers claiming the EITC and the level of benefits they receive vary widely within and across communities, as shown by the local-level IRS data we post each year on our EITC Interactive data tool. For instance, almost one in three filers in the Memphis metro area claimed the credit (32 percent) in tax year 2013 compared to just 12 percent of filers in metro Boston. Local labor market conditions can affect these numbers, like the incidence and concentration of low-wage jobs or regional differences in cost of living and average wage levels. But the credit itself is also designed to vary across different kinds of filers and families. Maximum credit levels for workers without children are quite small, but they increase considerably for workers with one, two, or three children—boosting the credit’s work incentive and anti-poverty impacts.

For the first time, our EITC Interactive tool now includes data on how EITC receipt varies by the number of children claimed.

According to that data, last tax year workers without qualifying children received an average credit of $281 (Figure 1). Although they made up almost one in four EITC filers, childless workers accounted for just 3 percent of EITC dollars claimed, due to the small size of their credit (Figure 2). In contrast, workers with one child—the largest share of EITC filers (37 percent)—claimed an average credit of $2,316. Workers with two kids accounted for 27 percent of EITC filers, but with an average credit of $3,682 they took home 40 percent of all EITC dollars. Working families with three or more children made up the smallest share of EITC filers last tax year, but claimed the largest credit on average at $4,036.

These data, which are available down to the ZIP code level, offer insights into the ways in which the makeup of the EITC population (and the low-wage workforce more generally) varies across places. Returning to the Memphis and Boston regions, each metro area received more than half a billion dollars through the EITC last year ($517 and $512 million, respectively). However, the number of filers claiming the EITC was much larger in metro Boston (256,456) than in the Memphis metro area (178,241). In part, these numbers reflect the fact that 30 percent of metro Boston’s EITC filers were childless workers. In the Memphis metro area, just 15 percent of EITC filers did not have qualifying children, while 41 percent had one child, 31 percent had two children, and 12 percent had three or more children—higher than Boston’s share of EITC filers with children across the board (37 percent had one child, 24 percent had two children, and 9 percent had three or more children).

For EITC outreach campaigns working to ensure eligible filers claim the EITC at tax time, and for practitioners looking to use tax time to connect low-income workers to financial services and benefits, these numbers give a sense of who lives in their community and how to target their services. For advocates and policymakers, these numbers help shed light on how potential changes to the credit might affect different places.

For instance, the Obama administration, several legislators, and at least one presidential candidate have proposed expanding the EITC for workers without qualifying children to make it a more effective poverty alleviation and work support tool. Every congressional district in the country has childless workers or noncustodial parents who would stand to benefit from that expansion. But that expansion would be particularly important for the more than 240 districts—largely clustered on the coasts and roughly split between Republican and Democratic representatives—with above average shares of childless EITC filers (Map 1).

In contrast, if Congress does not act to make recent expansions to the credit permanent, every district will see a cut in EITC benefits in 2017, when the credit for workers with three or more children is set to disappear. In particular, more than 200 districts with above average shares of EITC filers with three or more kids—this time predominantly Republican districts clustered in the Intermountain West, parts of the Great Plains, and along the Texas border—would be most affected (Map 2). 

In the coming weeks, we will be delving deeper into the impact of proposed and potential changes to the EITC and releasing new resources on the EITC-eligible population and the credit’s anti-poverty impact. In the meantime, these new EITC Interactive data offer an important resource that can help practitioners, policymakers, advocates, and researchers better understand how the EITC affects low-income workers and families and their communities across the country.

As the holiday season rolls around each year, it often carries a hefty price tag that can strain family budgets. In a survey of low-income taxpayers using volunteer tax preparation services, three-quarters of respondents listed December as a time of year when it’s hardest to make ends meet. But it’s not the only one. Low-income families go through a constant year-round balancing act of juggling bills, going without, asking family and friends for help, and taking on debt when they fall behind.

Many of these families benefit from the Earned Income Tax Credit, which supplements earnings for low-income workers. The EITC has proven to be one of the nation’s most effective anti-poverty programs, and for some families can represent up to 40 percent of their annual income. For the one in five American households that receive the EITC in their refunds, tax time gives them a chance to catch up financially as they start the New Year. But by summer, many recipients once again find themselves struggling paycheck to paycheck to shore up budget gaps, or scrambling to deal with unforeseen financial shocks, like a car breaking down or an unplanned medical expense.

Providing alternative payment options that deliver the credit outside of tax time would go a long way toward boosting economic stability year round for these families. In his new paper “Periodic payment of the Earned Income Tax Credit revisited,” Steve Holt explores the range of proposals that have emerged in recent years to provide more options for delivering the EITC during the year, and shares some lessons learned from early experiments to test those options.

Most notably, the Center for Economic Progress in Chicago recently completed a year-long pilot which offered 343 households the option of receiving half of their expected EITC in four payments in advance of tax time. The results of the pilot were overwhelmingly positive. Compared to EITC recipients in the control group, participants who received periodic payments missed fewer bills and racked up fewer late fees. They were less likely to resort to payday lenders or have to borrow money from family and friends. And they reported less food insecurity and decreased financial stress throughout the year. What’s more, after completing the pilot, 90 percent of the participants reported a preference for periodic payment over the standard lump sum.

More experimentation needs to be done to determine effective ways to replicate and expand on the advanced-payment pilot in Chicago. And future experimentation should also include pilots that test proposals for deferred savings mechanisms. These options, like CFED’s Rainy Day EITC proposal, would allow EITC filers to put a portion of their credit in a savings account and receive a bonus match as an incentive to save. Though structured differently than advanced payment options, the end goal of deferred savings proposals is the same: providing greater financial stability to low-income families outside of tax time.

A growing share of our economy’s jobs are in the low-wage industries and occupations in which many EITC-eligible taxpayers work (as illustrated by new national, state, and metro data from Brookings MetroTax model on characteristics of the EITC-eligible population). The EITC is an incredibly effective policy tool that helps bridge the gap between what the labor market provides and what it takes to support a family. But we can make the EITC work better for working families by offering alternative payment options that can help promote economic security year round.