EITC: Enhancing Health and Wealth

At Prosperity Now, we've been diving deep into exploring the link between health and wealth. It seems like every day new evidence is coming about how one's mental and physical health affects one's financial health (and vice versa) alongside examples of how those connections come to light in practice, such as the integration of financial capability services into community health centers (CHCs). One of the most exciting connections we're seeing in this space is between the EITC (Earned Income Tax Credit) and health.

The EITC is the most effective anti-poverty tool in the tax code. Last year, 27 million filers claimed the EITC, receiving an average benefit of $2,454. Significant expansions of the credit were made permanent in 2015, ensuring that approximately 16 million families – including 8 million children – won't be pushed deeper into poverty. Many workers use their EITC benefit to pay down debt, set money aside to save, or make repairs to their car or home. The EITC is a rarity on Capitol Hill these days: because of its proven track record, it enjoys strong bipartisan support.

The long term benefits of the EITC have been studied as well. This means improved test scores in school, boosted college enrollment, increased earnings as adults and, finally, higher Social Security benefits in retirement.

In addition to those significant and wide-ranging effects, new research from Columbia University's Mailman School of Public Health finds that receiving the EITC improves health outcomes as well. Researchers looked at data from 1993 to 2010 and found that receiving the EITC increased health-related quality of life and extended life expectancy. It also suggests that the EITC may be more effective than some health interventions in improving health outcomes.

The larger the EITC benefit, the more significant the improvement in quality of life. Researchers found that recipients living in states that had their own state-level match of the federal EITC gained additional quality of life over recipients in states that do not. Similarly, families that receive a larger EITC benefit because they have children gained more quality of life than single workers only eligible for a very small EITC benefit.

Along with the research indicating this connection, the link between EITC and health is coming out in practice, too. In early March, Prosperity Now featured StreetCred on our webinar about Your Finances, Your Health: Making the Health/Wealth Connection. StreetCred is an innovative organization that brings tax preparation into pediatricians' waiting rooms at Boston Medical Center—a safety net hospital that serves many of Boston's most vulnerable families. Recognizing the importance of EITC and its association with improved health, StreetCred works to help families access those credits more easily during their visits to pediatricians. In its first year, this program returned over $400,000 in tax refunds to almost 200 families. With the success of this program, StreetCred is now reaching out into the community health center (CHC) space to spread this momentum every further to the communities who most need these services.

This link between the EITC and health outcomes is just one more reason Congress should build on the success of EITC by expanding benefits to workers not raising children and empowering workers to save through a Rainy Day EITC program. While researchers noted that additional randomized control trials are needed to further demonstrate the EITC's effects on health, we know that the EITC improves economic outcomes for workers and educational outcomes for children. Now is the time to protect and expand this critical program.

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