Some recent improvements in the federal Earned Income Tax Credit (EITC) are set to expire at the end of the year which would negatively impact working families with three or more children and married couples. Your voice is needed to urge Members of Congress to make these improvements permanent and to protect the EITC in conversations regarding deficit reduction and tax reform. Take action today.

About the EITC

The Earned Income Tax Credit (EITC) is a refundable tax credit for working individuals who earn low or moderate incomes. It was enacted in 1975 as a way to transition welfare recipients to work and was expanded by President Reagan in 1986 and again expanded in the early 1990s. The tax credit reduces the tax burden on lower-income workers, supplements their wages and encourages greater participation in the workforce. The EITC is broadly considered the nation’s largest and most effective anti-poverty program.

About the Expiring Improvements

Improvements in 2009 increased the EITC rate for working families with three or more children from 40 percent to 45 percent, effectively increasing the maximum credit for these families by nearly $600. The financial penalty some couples receive once they marry was also reduced. The 2010 Tax Relief and Job Creation Act extended these improvements through the end of 2012. According to the Center on Budget and Policy Priorities, these temporary expansions alone were responsible for raising about 500,000 people out of poverty. Both the marriage penalty relief provision and the EITC expansion for families with three or more children are set to expire at the end of 2012 unless Congress takes action. Additionally, as Congress debates strategies to reduce the deficit and reform the tax code, the EITC will be on the table. It is important to urge protection of this critical tax credit that strengthens communities.

Why the EITC is a Top Priority for United Way

Studies find that the EITC encourages work, increases financial stability, helps families meet basic needs and improves children’s achievement in schools, all of which advance the common good. More than 340 United Ways across the United States help individuals and families access EITC through community Volunteer Income Tax Assistance and other programs. For the 2011 tax year, a coalition of 100 United Ways providing free tax preparation services across 40 states helped bring back $854 million in tax refunds to low- and moderate-income workers. More information about our Free Tax Preparation Campaign can be found here.