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Poverty and InequalitySexual and Reproductive HealthFamily, Maternal & Child HealthMethodology

The role of earned income tax credit in the budgets of low-income households

TitleThe role of earned income tax credit in the budgets of low-income households
Publication TypeJournal Article
Year of Publication2012
AuthorsMendenhall, R, Edin, K, Crowley, S, Sykes, J, Tach, L, Kriz, K, Kling, JR
JournalSocial Service Review
Volume86
Pagination367-400
ISBN Number00377961 (ISSN)
Abstract

The annual receipt of large tax refunds, primarily due to the Earned Income Tax Credit (EITC), provides households with unusual opportunities to pay old bills and build assets. To examine these opportunities, the study surveys 194 black, Latino, and white parents who received EITC refunds of at least $ 1,000; in-depth interviews followed 6 months later. The majority of households (57 percent) report that they planned to allocate a considerable portion of their refund to savings, and 39 percent are estimated to accomplish their goal. Although 72 percent of the sample planned to pay bills and debt with the refund, 84 percent are found to do so. The results also suggest that households often readjust planned allocations to meet emergencies, debt, and bills. Despite setbacks, many recipients have significant asset accumulation goals, which they say are fueled by the expectation of ongoing annual tax refunds. © 2012 by The University of Chicago. All rights reserved.