Schmudget Blog

Working Families Tax Rebate Would Promote Success in School and Work

Posted by michaelm at Jul 05, 2012 02:05 PM |

A new paper from the Center on Budget and Policy Priorities (CBPP) finds that an income boost provided by the federal Earned Income Tax Credit (EITC) helps children from lower-income families do better in school and achieve greater career success later in life.   

Washington could amplify these benefits by fully funding the Working Families Tax Rebate (WFTR), a state version of the EITC that was enacted in 2008, but never funded. In addition to highlighting the EITC’s well-established power to encourage work and fight poverty, the new CBPP report showcases new research on the program’s long-term generational benefits. Citing the report;

A small but growing body of research indicates that lifting the incomes of low-income families helps children in those families do better in school.  The added income may help children later in life, as well:  recent research finds that raising a poor family’s income by $3,000 a year (a fairly typical amount for a poor family to receive from the [Child Tax Credit] and EITC) between a child’s prenatal year and fifth birthday is associated with a significant increase in the child’s earnings in adulthood.  The leading study finds a 17 percent increase in earnings in adulthood, and an average of 135 hours of additional work per year, compared to similar children whose families do not receive the increase in income.

The Earned Income Tax Credit is a powerful tool for promoting prosperity; significantly reducing poverty while encouraging greater workforce participation among lower- and moderate-income families. In 2010 alone, the EITC, along with the Child Tax Credit, lifted an estimated 6.3 million people out of poverty – 4.9 million of which were children.

For more information on the Working Families Tax Rebate, check out our primer. Also, read a new report from the Carsey Institute detailing the positive impacts of state EITCs on health outcomes in children.

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