Effects of the Expanded EITC on Financial Security for Sexual and Gender Diverse Populations

• In Event: Uneven Impacts of Universal Policies related to Health and Economic Equity

Abstract

The Earned Income Tax Credit (EITC) is an important poverty alleviation tool in the U.S., estimated to lift millions of workers out of poverty. It provides a tax credit to workers based on income, marital status, and number of dependents, and is refundable when it exceeds tax liability. Yet, the EITC is structured to provide larger credits for workers with dependents and/or workers who are married, leaving low-income workers with no dependents particularly vulnerable. SGD people, specifically, are less likely to conform to cisheteronormative family structures (i.e. less likely to be married and less likely to have dependents) which may impact the maximum credit received from the EITC. The 2021 American Rescue Plan (ARP) included a temporary one-year expansion of the federal EITC for workers with no dependents, nearly tripling the maximum credit, raising the income eligibility threshold, and expanding eligibility to include adults aged 19 to 24 and over 65. Prior research has found that this expansion reduced indicators of financial security among young workers with no dependents. This expansion may have particular benefit for low-income SGD young people.This study leverages the temporary expansion as a natural experiment to examine whether changes to EITC eligibility and generosity can promote equity in financial security and better serve some of the most economically marginalized populations. Using 30 waves of the U.S. Census Bureau’s Household Pulse Survey (July 2021-October 2023), this study utilizes a difference-in-differences design to test the impact of the expansion on three indicators of financial security: difficulty paying household expenses, food insufficiency, and being behind on housing payments. Models compare newly eligible young workers (ages 19-24 with no dependents) to older workers with no dependents (ages 25-34) receiving a relatively smaller boost, stratified by SGD status. The intervention period was defined by the 2021 tax-year filing period.Preliminary results indicate that SGD people had significantly higher odds of experiencing difficulty with expenses and food insufficiency than their non-SGD peers at baseline. During the EITC expansion period, SGD people saw greater reductions in difficulty with expenses and food insufficiency. The EITC expansion had significantly larger protective effects for SGD workers aged 19-24 than for other groups. No significant differences were found for being behind on housing payments.

Author

• Katrina Kennedy, Johns Hopkins University
  Presenting Author