The Rainy Day EITC

Financial stability depends on emergency or “rainy day” savings, but a near-majority of Americans lack even a modest amount of rainy day savings. The Earned Income Tax Credit (EITC) is one of the mostimpactful programs for low-wage workers. While the EITC was not created to boost savings, it often functions as an imperfect, make-shift savings tool. This paper makes the case for a “Rainy Day EITC,” a policy reform to strengthen the EITC as a financial security tool. The program would allow taxpayers to defer 20% of their EITC for six months and receive a modest savings match for doing so.

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