Earned Income Tax Credits

Earned income tax credit (EITC) is a benefit for working people with low to moderate income that the federal government, many states and some local communities offer.^{1, 2} It is designed to incentivize work and help reduce poverty, particularly for families with children.^1,3 An EITC can act as an additional source of income when the benefit is set up as a refundable credit like the federal EITC and many state EITCs.^{3, 4} For example, the federal EITC could give a minimum wage worker with two kids up to 40% more income.^{5, 6}

By reducing poverty and increasing income for working families, EITC has been linked to positive health outcomes, particularly for infants and mothers.^{5, 7-9} Studies show greater health improvements happen when larger, more generous EITC benefits are available.^{7, 10-11} Health systems and public health partners can reach out to eligible people to raise awareness of and accessibility to the tax credit.

There is a well-established relationship between income and health, especially between poverty and poor health.^12-14 Income can influence people’s health in a variety of ways:

• Income can change people’s risk for one or more chronic diseases, like heart disease, diabetes, and stroke.¹⁵
• Many low-income families are unable to afford health insurance and healthcare, and they frequently do not have enough income to live in safe communities with adequate housing and schools. ¹⁵
• In many cases, low-income families do not have access to healthy food, parks or other physical activity facilities, and public transportation—all of which may improve health. ¹⁵
• Financial stress and insecurity that often accompany poverty can negatively affect health. ^{10, 15}

EITC can improve public health by helping to lift people out of poverty. Strong evidence consistently links low income to Adverse Childhood Experience (ACEs) exposures and children’s long-term health, educational, and social outcomes.¹⁶

• In 2018, federal EITC helped lift about 5.6 million people out of poverty – over half of them children . ¹⁷
• EITC has kept more children living above the poverty line than any other tax credit program.¹⁸

The existence of a state EITC is connected to a reduction in the low birthweight rate of infants (weight is less than 2500 grams, or about 5 lbs 8 oz). Low birthweight puts babies at risk for death and poor childhood health.¹⁹

• A 2019 study showed 23 states with an EITC saw a connection between EITC and reduction in low birthrate by 4 to 11 percent.¹⁰
• The same study found that states with the greatest reductions in low birthweight rates and greatest increases in birthweight all had refundable tax credits.¹⁰

In addition to positive health changes, earned income tax credits are also linked to increased economic activity at state and local levels.^20-21

• A 2007 analysis of the economic impact of a federal EITC in California found that EITC payments contributed to more than $5 billion in business sales in the state and helped add nearly 30,000 jobs. If all eligible people had claimed their EITCs, their payments would have contributed to another $1.2 billion in business sales and 7,500 jobs.²⁰