The Earned Income Tax Credit makes work pay better.
The EITC is a cash back tax credit that puts money directly back into the pockets of working families who need it most. The way it works is simple: low-income workers get money back from the government based on how much they earn, and how many children they have. It is designed to encourage and reward work by supplementing the earnings of low-wage workers who are working hard, but still struggling to get by.
The EITC has far-reaching positive consequences. It provides extra cash for basic necessities like education, food and housing, providing a safety net for struggling working families. It stimulates the local economy, where it is used by putting money in the hands of people who most need it and are most likely to spend it. Research also shows that children whose families receive the EITC are healthier, perform better in school, and earn more as when they enter the workforce.
The EITC is widely recognized as one of the most effective anti-poverty programs in America. In 2015, the federal EITC lifted about 6.5 million people out of poverty, including about 3.3 million children across the country. Iowa has also created its own state-level Earned Income Tax Credit, providing refunds to low-income families on their state taxes. Anyone eligible for the federal EITC will automatically be eligible for the Iowa EITC, which is equal to 15% of the federal credit.