2001 Reports

Untapped Potential: State Earned Income Credits and Child Poverty Reduction

Bennett, Neil G.; Lu, Hsien-Hen

NCCP is publishing this research brief at a time when a large and growing share of children in poverty have working parents. A strong national economy and welfare reform have contributed to a significant increase in the proportion of poor families with at least one parent in the workforce over the past several years. In this context, a key challenge for policymakers and others who are concerned about the well-being of children and families is how to develop and improve policies that reward work and help low-income working families to increase their earnings. One of the most promising policies in this regard is the earned income credit (EIC). (Note: The EIC is also commonly referred to as the EITC or earned income tax credit.) Research by NCCP has documented the powerful anti-poverty effects of the federal EIC, which benefits nearly 20 million working families each year. The federal EIC increases the after-tax income of these families by an average of about $1,500 per family at a total cost of just over $30 billion. This research brief examines the current and potential impact of state EICs as a means of building on the positive effects of the federal EIC at the state level. This is the third research brief in a series published by the National Center for Children in Poverty focusing on poverty dynamics in the 50 states and the District of Columbia.