UC researchers identify barriers to Earned Income Tax Credit, which provides up to $7K each year per family
About 1 out of 4 Californians who are eligible for the Earned Income Tax Credit do not actually receive it – and University of California researchers are digging deeper to learn why they are not taking up this crucial benefit, which can provide nearly $7,000 annually for each family.
“The EITC is the largest poverty alleviation program in the country for families with kids, lifting millions of people out of poverty every year,” said Rita Hamad, associate professor at the University of California, San Francisco in the Institute for Health Policy Studies. “We know from previous work – including our own studies – that the EITC is effective at improving health, including birth weight, child development, household food security, and parents' mental health.”
Hamad is the co-lead author of an article on EITC take-up, recently published in Health Affairs, which begins to answer why only 74% of Californians receive the EITC benefit for which they are eligible.
“Billions of dollars are going unclaimed by families who could really use the money to improve their families' health and well-being,” said Hamad, who is also director of UCSF's Social Policies for Health Equity Research Program.
More broadly, about 80% of eligible families across the country take advantage of the EITC, according to previous research. But those studies only looked at tax records, and do not shed light on the specific circumstances of households that missed the credit.
“What our study did was reach out to those families and start to collect some richer information on what's happening – why aren't people getting the benefit, and what can we learn to help more people get something that can make a big difference for families,” said co-lead author Wendi Gosliner, project scientist at the Nutrition Policy Institute, a program of UC Agriculture and Natural Resources.
On EITC, ‘the more we know, the better'
Surveying 411 EITC-eligible Californians with children, researchers found that roughly 25% of respondents did not receive the benefit (including the 9% that did not file taxes). And although the sample is non-representative, the study did produce some significant findings.
For example, take-up of the EITC and CalEITC (its California state counterpart) was less likely among eligible individuals who do not speak English, had no prior knowledge of the programs, and are younger.
The age factor – correlated with inexperience in tax filing – underscores the need to clarify eligibility verbiage and materials. Gosliner noted that several respondents thought all people under the age of 25 were ineligible, when in fact those under 25 who have dependents would qualify for the federal credit (for the CalEITC, all individuals over 18 are eligible).
Such findings help fine-tune the education and outreach activities of advocacy groups such as Golden State Opportunity, a nonprofit that works to create financial stability for low-income workers across California.
“Knowing that a barrier for younger people is lack of knowledge, we can increase our outreach to community colleges and other youth-serving organizations with messaging that reaches them where they are,” said Amy Everitt, president of Golden State Opportunity. “Thanks to this research we can better understand the diverse audiences we need to reach – when it comes to the EITC, the more we know, the better.”
Need for clearer tax information, better processes
The researchers are currently analyzing the qualitative data they gathered from the interviews to produce a follow-up paper. But Gosliner shared that some of the respondents' concerns were worries about owing the government, the belief that filers must pay back the EITC money, and lack of understanding about the tax system in general and the EITC specifically.
“It's very user-unfriendly,” Gosliner said. “Even the name of the program doesn't make sense to people – they don't understand it, they don't know what it means...it's like we intentionally create these hurdles to receive the benefit.”
Both Gosliner and Hamad recommended that the government simplify the tax process, while providing free, high-quality filing services in multiple languages to ensure families are receiving the benefits that can help reduce health inequities.
“Our study speaks to the fragmentation of the social safety net, with families needing to fill out multiple redundant applications to participate in each different program,” Hamad said. “A better solution would be to have government agencies coordinate with one another, so that families who are cash-strapped with limited time can fill out just one streamlined application.”
Information on federal EITC: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc
Information on CalEITC: https://www.caleitc4me.org/
The full article can be found at: https://www.healthaffairs.org/doi/10.1377/hlthaff.2022.00713
The other authors of the study are: Erika M. Brown, UCSF; Mekhala Hoskote, UC Berkeley and UCSF; Kaitlyn Jackson, UCSF; Elsa M. Esparza, UC Berkeley; and Lia C. H. Fernald, UC Berkeley.