This afternoon, Voices for Children Economic Stability and Health Policy Coordinator Aubrey Mancuso testified in support of LB495, which would raise the earned income tax (EITC) credit in Nebraska to 15% of the federal EITC.
Voices for Children is in support of LB 495 because the Earned Income Tax Credit is one of the most effective tools we have for addressing child poverty and it provides a tax cut to Nebraska’s lower income working families. In 2007, Nebraska expanded the state EITC to 10% of the federal credit. LB 495 would take the next step to increase the credit to 15% and put us on par with neighboring states. The EITC helps keep working families and children above the poverty line. In spite of a strong economy, our child poverty rate in Nebraska has continued to climb from 10% in the year 2000 to 17.7%, or almost one in 5 kids, in 2013.
Nationally, the EITC lifted 6.2 million people out of poverty, including about 3.2 million children. The number of poor children would have been one-quarter higher without the EITC. The credit also reduced the severity of poverty for another 21.6 million people, including 7.8 million children. Over 137,000 families in Nebraska, or almost 1 in 6 tax filers, claimed the state EITC in 2013 and over 31 million dollars was put back in the pockets of Nebraska’s low income working families.
Over 177,000 children live in Nebraska households who benefit from the EITC. Studies show that the impact of these tax credits on children and families is significant. An increase in family income from these credits is associated with increases student achievement in school as well as the child’s future earnings as an adult. The EITC has even been found to be associated with positive impacts on child health. Expanding state EITCs has been associated with higher rates of private health insurance and lower rates of public health insurance for children.
Finally, the EITC is a tool for promoting savings among lower income families. One study of those that received an EITC of greater than $1,000 found that 39% saved some portion of their tax return. In conclusion, the EITC is one of the most effective tools we have for addressing child poverty and it has several benefits for children that extend beyond just additional money for their family to meet basic expenses.