Advocacy and Education: The Earned Income Tax Credit

Each year Americans dread Tax Day, but for many people, filing taxes can reap tremendous benefits. Since 1975, the Earned Income Tax Credit, or EITC, has lifted out of poverty millions of low-income workers by providing a federal tax credit for those who work, but earn less than 200 percent of the federal poverty level, depending upon the size of one's family.

The EITC is a highly successful method for combating poverty because it results in three tangible benefits: (1) the support and promotion of work, (2) the reduction of poverty, especially among children, and (3) the reduction of tax and income inequality.

For those workers who earn leass than 200 percent of the federal poverty level and file their tax return, the federal government will issue a refund of up to $4,140. For example, a family of four with one parent working full-time and earning $7.00/hr. ($12,459 per year) is eligible to receive the full refund of $4,140. The cash refund lifts this family's total yearly income by nearly 30 percent to $18,689.1

Maximum EITC Refunds & Qualifying Income Levels by Family Size and Marital Status:

# Children = 0 # Children = 1 # Children = 2 or more
Single
 Married
 Single
 Married
 Single
 Married

*$376

**$4,900 to $6,149

*$376

**$4,900 to $7,149

 *$2,506

**$7,350 to $13,549		 *$2,506

**$7,350 to $14,549		 *$4,140

**$10,350 to $14,549		 *$4,140

**$10,350 to $14,549
Source: The Finance Project
*Tax Year 2002 Maximum EITC Refund
**Tax Year 2002 Income Range Receiving Maximum Credit


Interviews with workers who have received an EITC refund suggest recipients use these funds to invest in their long-term futures by paying off debt, saving for college and securing stable sources of housing and transportation.2

Currently only seventeen states have in place a statewide EITC to complement the federal EITC - Arizona is not one of those states. Proponents of a state EITC maintain it would further improve the status of low-income workers by acting much as the federal EITC currently does by rewarding those who work but do not earn enough to escape poverty.

For more information on the issues surrounding the Earned Income Tax Credit, log onto the web sites of the following organizations:

The National Tax Assistance for Working Families Campaign
Center on Budget and Policy Priorities
State EITC Online Resource Center

1Making Wages Work, The Finance Project: http://www.financeprojectinfo.org/mww/earned.asp
2EITC Fact Sheet, The National Tax Assistance for Working Families Campaign: http://www.eitc.info

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