ANN ARBOR – New research shows a temporary expansion to the Earned Income Tax Credit improved housing security for young workers who don't have children.
The findings – from researchers at Columbia University and the University of Michigan – have implications for federal and state policymakers looking to reduce hardship for childless workers ages 19 to 24. The study is now published in the peer-reviewed National Tax Journal, and a related policy brief released today summarizes key findings and makes policy recommendations.
"Young adults under 24 years old face some of the highest poverty rates of any age group in the U.S. This is a life stage when many people are moving out of their parents' homes and trying to make a living on their own for the first time. Young childless adults are largely excluded from most social safety net programs, this temporary policy extended benefits to this working population for the first time and our study showed it helped," said Natasha Pilkauskas, associate director of Poverty Solutions at the University of Michigan.
Pilkauskas, who also is a public policy professor, co-authored the journal article and policy brief with Jiwan Lee, a postdoctoral research associate at Brown University's Population Studies and Training Center; Katherine Michelmore, a public policy professor at the Gerald R. Ford School of Public Policy at U-M; and Christopher Wimer, a senior research scientist and director of the Center on Poverty and Social Policy at Columbia University.
The standard federal Earned Income Tax Credit offers a maximum of $538 to workers without children but excludes working adults under age 25. This "childless EITC" is available to people ages 25-64 whose earnings are below $15,820.
As part of pandemic recovery efforts in March 2021, the federal government expanded the childless EITC for one year. The expansion included:
- nearly tripling the maximum credit from $538 to $1,502,
- lowering the minimum age of eligibility from 25 to 19 for non-student tax filers, and
- raising the income eligibility limit from $15,820 to $21,430.
The expansion made about 6.4 million workers ages 19 to 24 newly eligible for the EITC, and 4.3 million of them claimed the credit.
To see what difference the tax credit made for those childless young workers, the researchers analyzed nationally representative survey data from the U.S. Census for 2021–2023. The survey asked people about not having enough food to eat, falling behind on rent or mortgage payments, and difficulty covering routine household expenses like utilities, car payments, and medical bills.
The study compared young adults aged 19–24 who became newly eligible for the expanded childless EITC in 2021 to adults aged 25–34 who were eligible for the credit the whole time. The analysis found the expanded childless EITC reduced the share of young adults who reported being behind on their rent or mortgage payments by almost one-third (29%).
"The reduction was concentrated in April 2022, when most tax refunds were received, and disappeared after the expansion expired. This suggests that many young adults used the lump-sum tax refund to catch up on overdue housing payments," Wimer said.
The study found the expanded childless EITC also may have improved young adults' ability to pay for routine expenses and to have enough food to eat, but there was less consistent evidence of those effects.
Based on these findings, researchers recommend making the 2021 childless EITC expansion permanent in all three of its parts: extending eligibility to adults ages 19 to 24, increasing the credit amount, and raising the income limit so that the credit reaches more workers with low wages.
"This study demonstrates that even a modest, temporary expansion of the childless EITC can meaningfully reduce hardship for childless young adults with low incomes, particularly in addressing housing needs," Lee said.
While Congress sets the rules for the federal credit, states can tailor their own EITCs; nine states have already extended EITC eligibility to childless workers under age 25.
"Extending the childless EITC to adults under age 25 would help address poverty among this population. These young adults are already in the labor force; making them eligible for this tax credit would help improve their economic well-being," Michelmore said.
