We all want expanded opportunities for our communities and to ensure our neighbors have the support they need to be stable and secure. But corporations are raising prices on necessities from food to energy to housing, making it harder for people who were already struggling.
The Earned Income Tax Credit (EITC) is for workers with low incomes and builds a stronger foundation for families by providing a few hundred dollars more in their annual tax refund. As Mainers spend these dollars at local businesses, they not only provide for their families but keep money flowing through our economy.
Last month, the Legislature and governor doubled the state Earned Income Tax Credit, meaning more working people in rural, suburban, and urban communities can make ends meet.
The maximum EITC increased from $140 to $280 for a single filer and from $832 to $1,734 for a family. About 100,000 Maine households benefit from the EITC and families with children will now receive an extra $400 a year on average
This permanent change will start benefitting Mainers next spring when they file their 2022 income taxes. The additional cash families receive from the EITC has been used to pay down debt, catch up on bills, pay for child care, and make large purchases such as a security deposit on an apartment rental or a big car repair.
The state EITC will match 25 to 50 percent of the federal EITC a household receives. In 2019, 95,000 households received the federal EITC and were also eligible for the state credit.1 Of these filers, 68 percent had dependent children in the home and 101,000 Maine kids in total benefitted from the boosted incomes this credit provides.2
The Earned Income Tax Credit:
- Plays an important role in stabilizing income for Mainers who work but are paid low wages. While some households with incomes up to about $56,000 are eligible for the EITC, the median income for recipients in 2018 was $15,197.3 The EITC is also important for mitigating effects of pay disparities, particularly for Black and women workers. While Black Mainers make up 1.3 percent of Maine’s population, in 2018, 3 percent of EITC recipients were Black.4 For that same year, 70 percent of eligible households had either a primary or joint filer who was a woman.5
- Encourages and rewards work, especially for single parents working in low wage jobs, who, as primary caregivers, struggle to balance work schedules and secure affordable child care.6 In 2018, 43 percent of EITC recipients in Maine were single parents.7 The EITC boosts incomes and helps these families make work pay. This is both good for strengthening the labor force and enhancing retirement security. These workers who might otherwise be out of the workforce — due to inability to afford child care or transportation — are now able to pay into social security and maximize their income in retirement.
- Is among the most effective tools in reducing poverty, along with other refundable credits for households with low income. Research shows that boosting household incomes in families with small children (under age five) significantly improves longer term outcomes for those youth, particularly as it relates to their future earnings and involvement in the workforce.8
Ultimately, the doubling of the EITC will provide greater economic security for 100,000 Maine households with low income, help workers and families manage rising costs, and build a strong foundation for children to thrive.
Notes:
[1] IRS Statistics of Income, Historical Table 2. Full-year data after IRS math error corrections and after other adjustments associated with errors in claims.
[2] CBPP calculations using unpublished data provided by the IRS Compliance Data Warehouse. Full-year data after IRS math error corrections and before other adjustments associated with errors in claims.
[3] Estimates were prepared using the Urban Institute’s Analysis of Transfers, Taxes, and Income Security (ATTIS) microsimulation model using data from the American Community Survey (ACS), accessed via IPUMS USA.
[4] American Community Survey 3 year data 2017-2019; Estimates of EITC filers were prepared using the Urban Institute’s Analysis of Transfers, Taxes, and Income Security (ATTIS) microsimulation model using data from the American Community Survey (ACS) 2018, accessed via IPUMS USA.
[5] CBPP calculations with estimates prepared using the Urban Institute’s Analysis of Transfers, Taxes, and Income Security (ATTIS) microsimulation model using data from the American Community Survey (ACS), accessed via IPUMS USA.
[6] Policy Basics: The Earned Income Tax Credit. The Center on Budget and Policy Priorities. Updated December 10, 2019 https://www.cbpp.org/research/federal-tax/the-earned-income-tax-credit
[7] CBPP calculations using unpublished data provided by the IRS Compliance Data Warehouse.
Full-year data after IRS math error corrections and before other adjustments associated with errors in claims.
[8] Policy Basics: The Earned Income Tax Credit. The Center on Budget and Policy Priorities. Updated December 10, 2019 https://www.cbpp.org/research/federal-tax/the-earned-income-tax-credit
