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 - and an index measure of the total number of these hardships (0-3). Models compare newly eligible young workers with no dependents (ages 19-24, "high boost") 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 populations were significantly more likely to experience difficulty with household expenses, food insufficiency, and a higher total number of hardships than their non-SGD peers overall. Among the non-SGD group, we found evidence of an impact of the "high boost" EITC expansion on food insufficiency and total number of hardships. Yet we did not observe these effects among the SGD group. Expanding the EITC eligibility for low-income young workers with no dependents may be a beneficial tool for promoting financial security among non-SGD populations, but may not have the same effect among economically vulnerable SGD populations. 

Author

• Katrina Kennedy, Johns Hopkins University
  Presenting Author