Who Knows about the Earned Income Tax Credit

Abstract

Hispanic parents are much less likely to know about the program than lowincome non-Hispanic parents of any race. The Earned Income Tax Credit (EITC) is the largest cash transfer program for lowincome parents in the United States. 1 The refundable tax credit supplements wages and offsets taxes paid by low-income workers. Research suggests that the EITC has not only been effective in moving families over the poverty line, but it has also encouraged work among single mothers (Eissa and Hoynes 1998; Meyer and Rosenbaum 1999; Porter et al. 1998). Recipients use the money they receive from the EITC for investments in education and savings as well as to help them pay bills and daily living expenses. 2 The EITC is administered through the federal income tax system. To receive the credit, low-income workers must file a tax return, even if they are otherwise exempt from doing so. As a result, knowledge of the EITC is essential if all eligible, lowincome parents are to receive the credit. Furthermore, the EITC can only influence the labor supply of low-income parents who know about the program. 3 Although the federal government and many advocacy groups have designed outreach programs to increase program participation, relatively little is known about whether potentially eligible recipients are aware of the EITC. Using data from the 1999 National Survey of America’s Families (NSAF), this brief examines demographic differences in knowledge about the EITC among parents across three divisions: (1) income and welfare participation; (2) marriage and education; and (3) race, ethnicity and citizenship. 4 Nearly two-thirds of all parents have heard of the EITC and just under 30 percent of parents have received the credit at some time. Low-income Hispanic parents are much less likely to know about the program than low-income non-Hispanic parents of any race. Among low-income parents who know about the EITC, Hispanics are also less likely to have ever received the tax credit. Past welfare participants are more likely than current recipients or parents who never received welfare to know about the program.