New Report Shows A State Earned Income Credit Would Help Kentucky Families and the Economy

Jeffersontown, KY -Thousands of Kentucky families and communities could see immediate and long term benefits, at little cost to the state,  if policymakers implemented a state Earned Income Credit (EIC), also known as EITC, according to a new Blueprint for Kentucky’s Children issue brief from Kentucky Youth Advocates. The issue brief, A State Earned Income Credit Would Help Kentucky Families and Local Economies, examines the federal EIC’s 30-year track record of lifting children and families out of poverty and highlights the benefits a state EIC would provide to the Commonwealth.

“The 2014 legislative session can be a moment when hard-working families and local economies both win – if, and only if political leaders in Frankfort come together and make passage of a  state EIC a bipartisan priority in 2014, ” said Terry Brooks, executive director of Kentucky Youth Advocates. “A strong Kentucky economy truly hinges upon all residents – including low-income working families being able to make ends meet and relying less on government programs. Implementing a state EIC in Kentucky would help thousands of low-income families and, in turn, our local businesses and our economy.”

In 2011, the federal EIC put almost $895 million into the pockets of Kentuckians, helping working families of all types close the gap between what they earn and what they need to make ends meet. For example, a married couple with three children making $38,000 would qualify for a Federal EIC of $2,852.

Of all federal individual income tax filers in Kentucky, 23 percent received the federal EIC in 2011. In 35 counties, at least 30 percent of filers received the EIC, with as many as 41 percent in McCreary County. Even in counties with higher average incomes, many filers are eligible for the federal EIC. For example, in Oldham County, more than one in ten filers claimed the federal EIC.

The brief identifies several benefits of a state EIC:

  • An EIC does more than help families make ends meet. Research shows that children do better in school when their families bring in more money. When a child does better in school, the chances they will earn more as adults increases – a long term benefit for everyone.
  • The EIC is a proven method to keep working families out of poverty. The federal EIC is credited for keeping more children out of poverty in the United States than any other program. In Kentucky alone, it keeps more than 50,000 children above the poverty line. EIC recipients work and pay taxes.
  • The EIC is most often used as a temporary support. Three out of five recipients claim the EIC for short periods-only one or two years. The EIC is a good way to help families that experience temporary job loss, reduced hours, or reduced pay stay on their feet.
  • The EIC also strengthens local economies. Families mostly use the federal EIC to pay for basic necessities. That spending takes place at local stores and businesses, stimulating the local economy. In the last decade, several studies have measured the economic effect of the credit. These studies have demonstrated that every dollar of EIC refund to taxpayers generates local economic activity worth: $1.07 in Nashville; $1.40 in Fresno; $1.58 in San Antonio; and $1.67 in Michigan.

By implementing an EIC in Kentucky, thousands of low-income working families would have additional funds to address their immediate needs and to put more money toward achieving long-term economic success.

“The federal Earned Income Credit is designed to encourage work while also providing much-needed support for low-income families,” said Brooks. “We give tax breaks to big businesses to encourage economic activity. It’s time to also encourage economic development through a state Earned Income Credit.”

A State Earned Income Credit Would Help Kentucky Families and Local Economies is available on the Blueprint for Kentucky’s Children website at www.blueprintky.org and Kentucky Youth Advocates website at www.kyyouth.org. If you have questions about this report or if you would like schedule an interview, please contact Andrea Bennett at abennett@kyyouth.org or 502-381-1176.

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