We both have the good fortune of teaching students about economic policies to address poverty and income inequality, challenging issues with few easy solutions. Yet one policy stands out for its proven track record: the Earned Income Tax Credit, a refundable tax credit for low-income workers. The EITC not only works, it is perhaps the best economic policy we have for lifting working parents and their children out of poverty.
The EITC enjoys bipartisan support. It was proposed under President Richard Nixon, continued under successive presidents, and was substantially expanded by President Ronald Reagan and by President Bill Clinton while Dr. Tyson served as the chair of the President’s Council of Economic Advisers.
Recently, Gov. Jerry Brown, Senate President Pro Tem Kevin de León and Assembly Speaker Anthony Rendon announced that they had reached agreement on the 2017-18 California state budget featuring an expansion of the state’s own EITC to more than 1 million more households. We commend this action that makes necessary improvements to a proven anti-poverty policy, and we look forward to the governor signing a significant expansion of the CalEITC into law.
The CalEITC was introduced two years ago to amplify the many well-documented benefits of the federal EITC. Of the EITC’s multitude of benefits, first and foremost it reduces poverty. It is an essential part of our country’s safety net. In fact, according to a report from Stanford’s Center on Poverty and Inequality, the EITC is the most effective anti-poverty policy after Social Security.
The refundable EITC and CalEITC tax credits go directly into the pockets of those who spend their refunds on goods and services. The increase in spending boosts their local economies and invigorates their communities. According to the PPIC, the federal EITC provides $7.3 billion to local economies throughout the state.
In addition to its effects on poverty-reduction, the EITC has a significant impact on the labor…