It’s Tax Day, and for many low- and moderate-income American workers, tax time means claiming the Earned Income Tax Credit (EITC), which helps offset federal taxes. (Many of these families can also claim the low-income portion of the Child Tax Credit.)
We often think that all money is the same, differing only in the dollar amount. But one study that examined what the EITC meant to its recipients found that the way we receive money matters.
A dollar isn't just a dollar. The way it's given imbues it with meaning. EITC recipients receive their refund through their taxes, a system in which nearly all Americans participate. The tax credit isn’t a handout; it’s an acknowledgement of a sometimes-overlooked segment of the population’s contributions to society. By using the tax system to deliver this part of the safety net, the EITC imparts a sense of dignity that “enhances feelings of citizenship and social inclusion.”
Another defining aspect of the EITC is that it comes in one lump sum during tax time. Many taxpayers who get the EITC spend it on unpaid bills and debt that have accumulated or to save toward their long-term dreams. In this way, the credit can be a catalyst for upward mobility.
The EITC provides an opportunity for low-income families to find relief from financial stress, boost their upward mobility, and be included in the fabric of America’s financial system.
To learn more about free tax filing and refundable tax credits, visit CBPP’s Get It Back Campaign, which helps organizations connect workers to the EITC, other tax credits, and free tax filing services.