Today marks Earned Income Tax Credit (EITC) Awareness Day, when we raise awareness of one of the nation’s most successful anti-poverty programs for working households. Each year, the EITC lifts millions of working families and children out of poverty and also prevents those from being taxed deeper into poverty. It kept 5.7 million people - over half of them children - out of poverty in 2017. Unfortunately, about 20 percent of eligible taxpayers do not claim it and millions of workers miss out on the benefits they earned and deserve.
Montana families work hard but earn some of the lowest wages in the nation. In fact, about 23 percent of all jobs in Montana are in low-wage occupations and fail to provide enough income for a family to afford basic needs. The EITC acts as a wage supplement for households with earnings from work. The credit amount depends on a family’s size and income, and phases out when earnings increase. In Montana, 73,000 eligible workers and families receive an average benefit of $2,178 through this federal EITC program. This income boost helps families living paycheck-to-paycheck to afford a winter coats for the children, car repairs, and utility bills. It gets folks back on solid ground. Young children in families that receive the EITC tend to fare better in health, go further in school, and earn more as adults because the additional resources help parents meet their needs. Another added bonus is because the EITC puts money back in the pockets of people most likely to spend it on goods and services in their community, local businesses and economies benefit from increased spending.
Montana took the important step of enacting a state-level EITC which went into effect in 2019. However, the maximum benefit is set at 3 percent of the federal credit, making it the smallest among all states that offer a state EITC. For EITC Awareness Day, let’s recognize just how critical this program is for the over 70,000 Montanans who are better able to make ends meet. We can also do more to keep families working and out of poverty by expanding the value of Montana’s state credit.
As we enter tax filing season, we encourage folks to find out if they are eligible and find free help to fill out their tax returns. Montanans can also check out montanafreefile.org for free filing options. Montana Free File is a statewide public awareness campaign informing Montanans about free tax filing options available to them. It was formed out of a collaborative effort in 2006 and has expanded to include non-profit and government organizations. Current partners include Montana Department of Revenue, Montana Legal Services Association, Rural Dynamics, and AARP Tax-Aid Montana.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.