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25 for 25: The Earned Income Tax Credit

We are commemorating our 25th Anniversary with 25 posts about our history and accomplishments between now and the Spotlight Gala on September 15.  Join us for a celebration of Voices for Children and all of the organizations, lawmakers, and individuals who have supported our work on behalf of children.  For details, visit voicesforchildren.com/spotlight-gala.


Image via flickr from 401(K) 2012. Used under CC-Attribution.

The Earned Income Tax Credit (EITC) is widely considered to be one of the most effective government tools for addressing the issue of poverty.

The EITC was first enacted by the federal government as a tax credit for low- and moderate-income working families and individuals.  A taxpayer must have earnings from work in order to qualify.  It is designed to encourage and reward work, as well as to offset payroll and income taxes.

The EITC is “refundable,” which means that if the credit exceeds a low-wage worker’s tax liability, the balance is refunded to the worker.  The EITC’s primary recipients are working parents with children, though there is a small EITC for working adults without children.

In 2006, Voices for Children supported the establishment of a state EITC in Nebraska.  The intial credit was 8% of the federal credit, and, in 2007, we worked to support the passage of a bill to increase the credit to 10% of the federal credit.

Numerous studies have shown the impact that the EITC has on alleviating poverty.  The boost to income that this credit provides lifts many working families above the poverty line.

The EITC has also been shown to be effective at encouraging work, especially for single parents, because it ensures that low wage workers ultimately have more financial gain from their work efforts.  Newer research has even shown that this added income can also have a positive impact on children’s school performance.

In 2010, the state credit was claimed by 131,559 Nebraska households, putting over $27 million back in the wallets of hard working Nebraskans.  We will continue to work to ensure that this credit is preserved and improved so that it remains an effective tool for moving families out of poverty.


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