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POLICY INSIGHT
BEYOND THE NUMBERS

Earned Income Tax Credit Expansion Would Benefit American Indians and Alaska Natives

Expanding the Earned Income Tax Credit (EITC) for low-paid working adults not raising children in the home, as the COVID relief package before Congress would do on a temporary basis, would benefit hundreds of thousands of American Indian and Alaska Native (AIAN) individuals nationwide, our new analysis shows.

The EITC is a highly successful wage subsidy that’s earned bipartisan support over the years, but the current tax credit largely excludes adults who aren’t raising children (so-called “childless” adults), and it completely excludes young childless adults trying to gain a toehold in the labor market. The proposal approved by the House Ways and Means Committee recognizes that it’s time to begin fixing this glaring flaw and deliver across-the-board assistance to members of our most marginalized communities.

The package — similar to a provision of last year’s House-passed Heroes Act — would raise the maximum EITC for childless working adults from about $530 to roughly $1,500 and raise the qualifying income limit from about $16,000 to at least $21,000. It also would expand the age range of childless working adults eligible for the tax credit to include people aged 19-24 who aren’t full-time students, as well as people 65 and over. These improvements would be temporary, lasting for one year.

Low-paid working adults not raising children are the lone group that the federal tax code actually taxes into, or deeper into, poverty, partly because their EITC is so meager. Some 5.8 million childless working adults aged 19-65 (excluding full-time students aged 19-23) — including 193,000 American Indians and Alaska Natives — are taxed into or deeper into poverty. Ultimately, the proposal would benefit roughly 485,000 American Indians and Alaska Natives nationwide, including about 61,300 in California, 41,400 in Oklahoma, and 31,800 in Arizona. (See table.)

Before the pandemic, American Indians and Alaska Natives overall faced a poverty rate of about 18 percent under the Supplemental Poverty Measure (SPM) — a more comprehensive metric than the official poverty measure, which counts only cash income. The 18 percent AIAN poverty rate, which was higher than the overall national poverty rate of 13 percent under the SPM, reflects a variety of factors, including a history of colonialism, racism, and forced removal; ongoing discrimination in hiring, pay, and housing; and underinvestment in tribal governments and AIAN communities.

The COVID-19 pandemic and its economic fallout have shined a light on — and widened — these fault lines. While rates of hardship are elevated for all groups, AIAN communities have been hit particularly hard by both the health and economic effects of the ongoing crisis. In early 2021, adults who identify as American Indian, Alaska Native, Native Hawaiian, Pacific Islander, or as multiracial, taken together, were more than twice as likely as white adults to report that their household did not get enough to eat, at 18 percent compared to 7 percent. Similarly, 19 percent of renters in that group said that they weren’t caught up on rent, compared to 12 percent of white renters.

American Indian and Alaska Native working adults who aren’t raising children need more than the meager EITC in current law, and the temporary expansion before Congress would provide concrete, meaningful help.

 

TABLE 1
Temporary EITC Expansion Would Benefit American Indians and Alaska Natives Not Raising Children Nationwide
State Estimated Number of AIAN Working Adults Without Children Benefiting From EITC Expansion
Total U.S. 484,700
Alabama 4,400
Alaska 14,400
Arizona 31,800
Arkansas 6,000
California 61,300
Colorado 12,100
Connecticut 2,400
Florida 16,500
Georgia 7,200
Hawai’i 3,000
Idaho 3,900
Illinois 9,100
Indiana 7,000
Iowa 1,800
Kansas 6,700
Kentucky 3,300
Louisiana 4,000
Maine 2,700
Maryland 4,000
Massachusetts 4,100
Michigan 14,000
Minnesota 12,300
Mississippi 1,900
Missouri 5,600
Montana 8,300
Nebraska 3,600
Nevada 6,100
New Jersey 3,500
New Mexico 19,300
New York 15,200
North Carolina 17,000
North Dakota 3,600
Ohio 9,000
Oklahoma 41,400
Oregon 12,500
Pennsylvania 9,600
South Carolina 5,400
South Dakota 11,500
Tennessee 4,300
Texas 28,000
Utah 4,200
Virginia 7,200
Washington 19,600
Wisconsin 9,700
Wyoming 1,700

Note: Working adults not raising children in the home who would benefit from the House EITC expansion are those aged 19 and over (excluding full-time students 19-24). American Indians and Alaska Natives (AIAN) refers to people identifying as AIAN alone or in combination with other races, without regard to Latino ethnicity. Estimates exclude Delaware, the District of Columbia, New Hampshire, Rhode Island, Vermont, and West Virginia due to a lack of reliable data, although their numbers are reflected in the U.S. total.

Source: CBPP analysis of the U.S. Census Bureau’s March 2019 Current Population Survey (national estimate) allocated by state based on CBPP analysis of American Community Survey data for 2016-2018, using 2020 tax parameters and incomes adjusted to 2020 dollars.