A State EITC Can Help Montana Kids

Feb 14, 2017

By MBPC Staff

Kids don’t usually get too excited about things like tax credits. But they do appreciate things like being healthy, doing well in school, and having working parents. A state Earned Income Tax Credit (EITC) could help families provide their children with each of these things, and support our local communities as well.

Today we are going to talk about how children benefit from the EITC. If you’re not sure what that is, check out yesterday’s blog post first to get caught up.

While some very low-income families without children receive the EITC, most of the credits go to families with children. In Montana, 80,000 low- and moderate-income households benefit from the federal EITC. House Bill 391 would establish a state EITC, and help improve the lives of families and children all over the state.

The EITC essentially raises the income of working families by providing them with a tax credit. This bump in income has significant benefits for children. Nationwide, the federal ETIC has been the single most effective way to reduce poverty. In 2013, it lifted 6.2 million people, including 3.1 million children, out of poverty.

Although most families only receive the credit for a year or two, the benefits for children last much longer. Here are few examples of the long-lasting benefits the EITC can have on children:

• Better health at birth. Studies have shown that receiving the EITC can mean fewer babies born premature, or with low birthweight. Mothers were also more likely to receive prenatal care, and had better health indicators themselves.
• Better school performance. Children whose families receive larger EITCs are also more likely to do well on school tests, particularly in math.
• Brighter futures. Kids whose families receive larger ETICs are more likely to graduate from high school. They are also more likely to attend college.
• Higher earnings. A small boost in a family’s income when kids are little can mean big payoffs when they are older. For every $3,000 in extra income a year that a child in a low-income family received before age six, their working hours increase by 135 hours per year by the time they reach 25. Income increases by 17%.

Families spend their tax credits on basic needs, most of which directly benefit their children. About half of the credit tends to go to things like groceries or school supplies. Families spend the other half of things like paying off debt, or on home repairs, education, or savings. The EITC can help parents better provide for their children.

If Montana creates a state EITC, we can help build even healthier and stronger families across the state. House Bill 391 is an important opportunity to help our children succeed.

To learn more about how a state EITC would benefit Montana, read our report here.