While a powerful wage booster that benefits millions of families with children each year, the federal Earned Income Tax Credit (EITC) provides extremely limited support to adults aged 25-64 who work low-paying jobs and are not raising children in their household. Low-paid workers who are younger than 25 or older than 64 are excluded from the EITC entirely if they aren’t raising children in their home. Congress should expand the EITC, as it did in 2021, so that people working in low-paying jobs, whether or not they are raising children in their home, do not live in poverty.
This year, 6 million workers whose income is either below or just above the poverty line are made poor or even poorer, we estimate, largely because their EITC is not even enough to offset payroll taxes for Social Security and Medicare as well as any federal income tax liability. These workers earn up to roughly $25,500, often facing real challenges to affording their basic needs. These 6 million people provide important services, including as home health aides for elderly people, child care providers, food servers, and cashiers. Because of systemic discrimination in educational opportunities, employment and career development, and other inequities, people in low-paying jobs are more likely to be Black, Latinx, and American Indian or Alaska Native (AIAN).
Under current law, only adults between ages 25 and 64 can claim the “childless EITC.” The credit phases in slowly at 7.65 percent for earnings up to $8,260 and quickly phases out shortly after, with a maximum credit of just $632 in 2024. No one making above about $18,600 (single filers) or $25,500 (married filers) gets a single dollar from the EITC. As a result, many individuals are left out of the credit completely or get a paltry amount.
The 2021 American Rescue Plan Act temporarily made key expansions in the EITC for adults not raising children in their home, addressing several major flaws in the credit. Specifically, it raised the maximum EITC to roughly $1,500, as well as raising the income limit from about $16,000 to $21,000 for single filers and from about $22,000 to $27,000 for married filers. It also made individuals aged 19 to 24 and 65 and older newly eligible for the credit. Through these changes, the Rescue Plan’s “childless EITC” expansion nearly eliminated the policy failure of people being taxed into, or deeper into, poverty.
To make this more concrete, consider a home health aide working around 20 hours a week for $15 an hour, earning $16,800 this year. Under current law, she would receive an EITC worth $137, a miniscule amount, and would be pushed below the poverty line by federal taxes. But if a permanent Rescue Plan expansion were in place, she would receive an EITC worth $1,246, which she could use to cover rent, buy groceries, or pay for tuition to further her education.
The Rescue Plan’s temporary changes had a tremendous impact. If the temporary expansion had been made permanent, the EITC expansion would benefit about 14 million working adults for tax year 2024, based on our analysis of IRS data published by the Tax Policy Center. We estimate using Census data that this would include about 7.9 million white, 2.5 million Latinx, 2.3 million Black, 637,000 Asian, and 304,000 AIAN adults.
An estimated 4.0 million young adults aged 19 to 24 and 1.5 million people aged 65 and older would be newly eligible for the credit for 2024, our analysis of IRS data published by the Tax Policy Center shows. This change would give an income boost to younger workers, who are gaining a foothold in the labor market and are more likely to be working low-paying entry-level jobs, as well as low-income seniors who are still in the workforce.
The expansion would also have a significant impact on a broad group of people. Around 737,000 cashiers, 506,000 cooks, and 478,000 janitors, 312,000 personal care aides, and 229,000 child care workers would benefit from the EITC expansion (see first table). Hundreds of thousands of people working in other occupations, including as waiters, truck drivers, security guards, and administrative assistants, would also benefit.
People working in these low-paying occupations perform important, but often overlooked, roles in our society. Many of these occupations are physically intensive, and workers face unpredictable schedules with little to no sick leave or other types of paid leave. Yet many of these workers face an inequity in our tax system, which denies them the wage-boosting benefit of the EITC simply because they are not raising children under their roof. Some are non-custodial parents who may provide financial and parenting support to children — and most are part of extended families and communities.
It is time for Congress to end this inequity by passing legislation to permanently expand the EITC for adults not raising children in their households.
Note: Workers without children counted as benefiting from a permanent Rescue Plan EITC expansion are those aged 19 and older (excluding students under age 24 attending school at least part time) who would receive a larger credit under an indexed Rescue Plan EITC in 2024 compared to current law. We use indexed parameters for tax year 2024 from the U.S. Treasury Department’s “General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals.” Figures are rounded to the nearest 1,000. Figures may not sum to totals due to rounding.
Source: IRS Statistics of Income data published by the Tax Policy Center (for national total) allocated by occupation based on CBPP analysis of American Community Survey (ACS) data for 2017-2019.
Note: Workers without children counted as benefiting from a permanent Rescue Plan EITC expansion are those aged 19 and older (excluding students under age 24 attending school at least part time) who would receive a larger credit under an indexed Rescue Plan EITC in 2024 compared to current law. We use indexed parameters for tax year 2024 from the U.S. Treasury Department’s “General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals.” Figures are rounded to the nearest 1,000. Figures may not sum to totals due to rounding.
Source: IRS Statistics of Income data published by the Tax Policy Center (for national total) allocated by state based on CBPP analysis of American Community Survey (ACS) data for 2017-2019.