Today, in our EITC blog series, we’ll examine the broad impacts of the federal EITC, as well as the proposed state EITC, on Montana’s economy. As you may know from previous blog posts, the federal EITC is one of the most successful anti-poverty programs in history and improves the wellbeing of low-and-moderate income and working families. However, the EITC not only improves families’ financial security and independence, it strengthens local neighborhoods, businesses, and Montana’s economy.
The EITC puts income back into the pockets of low-wage and working families who then spend these dollars in their local communities. In effect, EITC dollars are circulated, becoming income for both recipients and nearby businesses. Research over the past decade shows that working families use EITC dollars in their local communities, creating demand for local goods and helping small businesses to grow and hire more workers.
A study looking at the economic impact of a state EITC in Baltimore found that the majority of EITC benefits claimed by city residents were spent in the immediate area. Apart from the federal credit, Maryland’s EITC encouraged spending in areas like retail stores and health care, and resulted in $16 million in economic activity and created 167 jobs in Baltimore. Though we cannot anticipate the exact scale at which a Montana state EITC would boost local economies, it is likely that our state will have similar impacts.
In 2012, the federal EITC injected $151 million into Montana’s economy. Enacting a state EITC set at 5% of the federal credit would contribute another $8.5 million into our local economies. This means that counties with large numbers of EITC filers, like Yellowstone, Flathead, and Gallatin, will receive a significant boosts to their local communities. These dollars will go to low-income working families who will shop locally for necessities like groceries, school clothes, and other supplies. EITC dollars are likely to remain local, helping to support businesses and their workers, creating jobs, and increasing wages in the community.
HB 592, Montana’s proposed EITC, is arguably the best solution to quickly improving the living conditions of tens of thousands in Montana, and it is an effective policy to boost local and state economies. Please contact your legislator today and let him or her know how important a state EITC is to your community.
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.