The earned income tax credit helped 493,000 Louisiana households make ends meet in 2020. Working families who claimed the credit – about 1 in 3 filers in the state – received 1.4 billion dollars, or an average of $ 2,873 per household. Unfortunately, the IRS estimates that only 78% of Louisiana households eligible for the EITC actually claim it, which means working families leave hundreds of millions of dollars in potential refunds on the table each year.
As the tax filing season begins amid a raging pandemic and economic insecurity, state officials must do all they can to ensure that the credit is claimed by all who qualify. . This will help more families meet their basic needs and inject money into local state economies.
For many working low-wage families, their tax refund is the biggest lump sum they’ll see throughout the year, and the EITC is a big part of that windfall. Since Louisiana is one of the 29 states that are improving this powerful tax credit, these households will also receive a 5% match on their tax returns, giving low-income workers an additional $ 68 million per year in refund.
To claim the credit, tax filers must have children and a job that earns no more than $ 41,000 to $ 56,000 per year, depending on their household size and marital status. The vast majority of the credit goes to families who earn much less than the maximum amount. This year, with so many declining household incomes due to the recession, more working families who have been laid off or have had their hours cut may be eligible for the credit.
When more eligible families claim the EITC, the whole economy sees the benefits. People who get the credit tend to spend the money on basic needs – clothing and groceries, restaurants or car repairs – and in their local communities, supporting local jobs.
The EITC can also help reduce child poverty, which increased during the pandemic. Research has shown that children from households that apply for the EITC do better in school and, as adults, have better financial and health outcomes than those from low-income families who qualify but do not apply. credit.
This tax reporting season, our state and local governments – from the governor to the mayors of our smallest towns – should do everything possible to educate the public about credit, so that every eligible Louisianan receives the refund they are owed. When more Louisianans eligible for EITC receive it, it’s good for our communities, good for our economy, and good for Louisiana.
Policy Analyst, Louisiana Budget Project