Tax policy is not usually the first solution offered in ending poverty. However, as we recognize Earned Income Tax Credit Awareness Day, we’d like to highlight the program that has assisted in moving millions out of poverty.
The Earned Income Tax Credit (EITC), created in 1975, focuses on putting more money back into the pockets of working families. The EITC does so by supplementing the earnings of low wage employees and promoting work.
Who can receive EITC?
The EITC was created to support working families. Working families with children must earn less than $39,296- $53,505 (depending on family’s size and marital status). Families filing without children must make less than $14,880- $20,430 depending on marital status.
How does it work?
Initially, the more you earn, the more you receive in credit. Credit amounts vary based on family size. As the phase in of credit occurs, recipients are able to move up the ladder of benefit. However, once recipients hit a maximum threshold, the credit amount begins to phase out. This model allows families to pursue higher paying jobs while still receiving necessary assistance to ensure their families wellbeing.
Why is this important?
By supplementing wages earned while incentivizing individuals to take higher paying jobs, we can move families out of poverty. The EITC not only encourages work, but rewards it as it grows with each dollar of earnings. When the labor market is strong, the EITC is one of the largest motivators for families to leave welfare to work.
Across party lines, supporters agree that no one deserves to be punished for working hard. EITC has continued to move millions of people out of poverty, including roughly three million children in 2015. This upcoming tax season, those eligible to receive EITC will notice a delay in their return. All tax payers who claim EITC will not be processed until February 15, 2017. Recipients will not be expected to see returns till February 27 at the earliest. Due to these changes, it might be tempting to turn to a payday lender in order to receive your money “upfront.” However, please be advised that these are predatory, high interest loans, rather than your tax return.
We at Catholic Charities Fort Worth offer Volunteer Income Tax Assistance (VITA) Services for free. For more details on services click here.