State of Awareness: The Effects of State Characteristics on Awareness and Uptake of the Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is the nation’s largest income-support program for poor and low-income families. Advocates of the EITC note that it assists low-income families by reducing their tax burdens, supplementing their wages, and helping to transition them into the workforce. In 2004 the program helped 4.9 million people, including 2.7 million children, move out of poverty. Since 1986, 17 states plus the District of Columbia have established tax credits - a large number of them implemented in the late 1990s. In order for low-income workers to qualify for the EITC, they must file an income tax return. Few studies have examined in-depth the relationship between state EITCs and EITC awareness, and no study has examined how state supportiveness affects EITC awareness and uptake. This study moves beyond previous research to examine the effects of state EITC policies and state generosity on individual awareness and uptake of the EITC. The Capstone team’s findings support previous research on individual characteristics—those most disadvantaged in terms of income, language, and work history are the least likely to be aware of and use the EITC. However, the team unexpectedly found that people living in more supportive states are less likely to be aware of and use the EITC. The team explored the dimensions and implications of this finding.