New Jersey Policy Perspective: Increasing the EITC Would Boost New Jersey’s Working Families
ITEP Work in ActionIncreasing 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.