What Is the EITC and How Does it Benefit WOC?
Today, we recognize Earned Income Tax Credit (EITC) Awareness Day. The Earned Income Tax Credit (EITC) is a federal tax credit for low- and moderate-income families that provides refunds. Along with the Child Tax Credit (CTC), the EITC is a piece of the tax code that especially benefits women of color.
You probably wonder, “what does a tax credit have to do with gender or racial justice?” I know this question keeps you up all night. But the answer is: everything. The credit can lift families out of poverty, but not many people know how it works or how it specifically benefits women of color.
WHAT IS THE EITC?
The EITC is a tax credit designed to support and reward work. The amount a family receives from the EITC depends on a person’s income, number of children, and marital status.
Refunds from the EITC boost the incomes of millions of families, especially families with children, above the poverty line every year. Research suggests that refunds from the EITC (and the CTC) can improve infant and maternal health, school performance, college enrollment, increased earnings for the next generation, and retirement benefits.
WHY DOES THIS MATTER FOR WOMEN OF COLOR?
Many low-paid occupations are held by women and people of color due to discriminatory hiring and wage practices. And since women of color hold many of these positions, they disproportionately benefit from tax credits like the EITC. 21 percent of Black and Latina women received the EITC, compared to 9 percent of white women who received it.
Women of color also experience significant wage gaps. A Black woman who works full time, year round will typically be paid only 62 cents for every dollar paid to their white, non-Hispanic male counterparts. This gap increases to only 61 cents for Native Hawaiian and Pacific Islander women, 57 cents for Native women, and 54 cents for Latinas.
The EITC can supplement low wages for women of color: In 2019, it boosted the incomes of 9 million women of color, in fact. Refundable tax credits like the EITC can help mitigate wage gaps and dismantle structural barriers by boosting millions of families’ incomes.
HOW DOES THE EITC ADVANCE GENDER AND RACIAL JUSTICE?
Some tax provisions inherently benefit and favor households with high incomes and wealth, white families over families of color, and men over women. The language of our tax code doesn’t explicitly state this. But in practice, women and families of color are left out of important tax subsidies, which often stifles economic security and wealth-building and reinforces structural inequality.
An increase in income greatly improves the overall wellbeing of people of color, particularly children, at every stage of life. The EITC has been proven to increase the economic security of women of color, and thus, increase racial and gender equity. Now that is a tax law that everyone should be aware of — and get behind.
We need a tax code that does not exclude women and people of color. One that works for all of us, not just the wealthiest people in this country.
Learn more about A Tax Code for the Rest of Us — and you can find out if you’re eligible for the EITC and how to claim it at IRS.gov/eitc.