Boosting the Earned Income Tax Credit to Help Metropolitan Workers and Families

Posted by on August 24, 2009

Report Highlights How to Boost Incomes of Working Families Struggling as the Recession Deepens

Expanding the Federal EITC could bring back $300 million to Chicago communities

High prices, low wages, no assets; the poorest are hit the hardest by the recession and would benefit the most from expanded tax credits being proposed by many in Washington, DC. From food to housing to child care, low-income families face rising costs at every turn. To make matters worse, their wages are stagnant, and many have lost their only asset, their home, to foreclosure. The federal Earned Income Tax Credit (EITC) is designed to ensure that low-income families are not pushed into poverty and a new report released today reveals the wide-ranging impact that expanding this tax benefit could have on families and communities across the country.

The Brookings Institution, a Washington, DC-based research institute, is launching a new report today titled, “Metro Raise: Boosting the Earned Income Tax Credit to Help Metropolitan Workers and Families.” The study examines the impact on individual states and large cities of expanding the EITC for people who currently do not benefit from the credit, including single workers, married couples, and larger families. (The Earned Income Tax Credit is a refundable federal income tax credit for low-income working individuals and families. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.)

Brookings estimates that expanding the EITC for these three types of households would increase the tax refunds of 400,000 taxpayers in the Chicago area bringing back an additional $300 million to struggling families and communities. This 25% increase in EITC dollars coming into the city would benefit the local economy and small businesses in neighborhoods like Pilsen, Auburn-Gresham, and Humboldt Park, where a high percentage of families who receive the EITC live and work.

“We are hearing a lot of talk about tax credits and tax reform from the Presidential Candidates and leaders in DC,” said David Marzahl, Executive Director of the Center for Economic Progress. “This report captures the direct, significant impact that expanding the EITC for low-wage workers would have in the lives of families and neighborhoods throughout Chicago.”

The push for major reform of the federal tax system began in earnest last year. It is expected that the new President and Congress will take up this issue next year and an expansion of the EITC will most likely be one of the proposals on the table. A copy of the report and supplemental state and local data is available at the Brookings Institution’s EITC website: http://www.brookings.edu/metro/MetroRaise.aspx

About the Center for Economic Progress
The Center for Economic Progress encourages self-sufficiency and promotes economic prosperity among America’s working families. Since 1990, the Center has built a reputation for innovative programs and forward-thinking initiatives — using the tax code to help 175,000 low-wage families achieve financial stability. Operating at the local, state, and national levels, the agency provides direct services, education, and advocacy to achieve its goals. Visit http://www.centerforprogress.org.