New Jersey Policy Perspective: Increasing the EITC Would Boost New Jersey's Working Families

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Increasing New Jersey’s Earned Income Tax Credit (EITC) to 30 percent from 20 percent of the federal EITC would provide over half a million New Jersey working families with a much-needed bump in their take-home pay while giving the state’s economy a boost.

But the economic impact of the EITC goes beyond the specific amount credited to each family. Low-wage workers tend to spend these tax credits immediately and locally on short- to medium-term needs like buying clothes for their family, repairing the family car, replacing household items like furniture or catching up on past-due rent or utility bills. It’s been estimated, due to this kind of immediate and local spending, that the EITC has a multiplier effect of 1.5 to 2 in local economies – in other words, every dollar of tax credit paid ends up generating $1.50 to $2 in local economic activity.

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