The Earned Income Tax Credit helped 493,000 Louisiana households make ends meet in 2020. The working families that claimed the credit — roughly 1 in every 3 tax filers in the state — received $1.4 billion, an average of $2,873 per household. Unfortunately, the IRS estimates that only 78% of Louisiana households who qualify for the EITC actually claim it, meaning working families are leaving hundreds of millions of dollars in potential refunds on the table every year.
As the tax-filing season begins amid a raging pandemic and economic insecurity, state officials should do all they can to make sure the credit is claimed by everyone who is eligible. Doing so will help more families provide for their basic needs and would pump money into local economies across the state.
For many working families with low wages, their tax refund is the largest lump sum of money that they will see all year, and the EITC is a big part of that windfall. Since Louisiana is one of the 29 states that enhance this powerful tax credit, these households will also receive a 5% match on their state returns, providing low-income workers with another $68 million per year in refunds.
To claim the credit, tax filers must have children and a job that pays no more than $41,000 to $56,000 annually, depending on their household size and marital status. The vast majority of the credit falls to families that make much less than the maximum amount. This year, with so many households’ incomes falling due to the recession, more working families who have been laid off or seen their hours reduced may qualify for the credit.
When more eligible families claim the EITC, the whole economy sees the benefits. People who get the credit tend to spend the money on basic needs — clothes and groceries, restaurants or car repairs — and in their local communities, supporting local jobs.
The EITC can also help alleviate child poverty, which has been rising during the pandemic. Research has shown that kids from households that claim the EITC do better in school and, as adults, have better health and financial outcomes than those from low-income families that qualify but don’t claim the credit.
This tax filing season, our state and local governments — from the governor to the mayors of our smallest towns — should do everything they can to educate the public about the credit, so every eligible Louisianan gets the refund they are due. When more Louisianans who qualify for the EITC receive it, it is good for our communities, good for our economy, and good for Louisiana.
policy analyst, Louisiana Budget Project