Oregon ranks near bottom in use of anti-poverty tax credit

News Release
January 29, 2020

Only two states fared worse than Oregon in 2016 when it came to share of families that qualified for the Earned Income Tax Credit (EITC) but did not claim it, according to a report by the Oregon Center for Public Policy. This continued Oregon’s “long pattern” of poor results, underscoring the need for state action to remove barriers to participating in this key anti-poverty strategy, the Center said.

“Low wage working families have an even harder time getting by when they miss out on this tax credit,” said Janet Bauer, a policy analyst with the Center. “It also means that fewer federal dollars are flowing to businesses in communities throughout Oregon.”

More than one in four working families eligible for the EITC did not claim the credit in 2016, according to the Center. Oregon’s EITC participation rate of 73.4 percent topped only the rates of Alaska and the District of Columbia in 2016, the year of most recent data. For several years, the report said, the state has ranked at or near the bottom nationally in terms of EITC participation.

The EITC is both a federal and a state tax credit designed to boost the income of workers who are paid low wages. To benefit from the EITC, an eligible worker must file tax returns claiming the tax credit. In 2016, the combined federal and state credits averaged $2,268 for Oregon families that received the credit.

To bring attention to the credit and encourage eligible families to claim it, the federal government established EITC Awareness Day. This year, EITC Awareness Day is January 31.

“It’s crucial that low-income families know that they can use this tax credit to increase their take-home pay,” said Bauer. “But it’s also important that Oregon recognize that there are barriers in the way of families claiming this vital tax benefit.”

Factors beyond lack of awareness also limit the use of the tax credit, the report said. These include the complexity of claiming the EITC, perceived and actual costs in filing a tax return, and language barriers for some filers.

Families are not the only ones to lose out when they don’t claim the tax credit; the state loses as well. The Center estimated that Oregon families left unclaimed about $137 million in EITC dollars — about $127 million of those being federal dollars that did not enter Oregon’s economy.

“We’re not capturing the full benefits of the EITC, including reduced poverty, better health for families, improved academic achievement for children, and even a boost to local economies,” said Bauer. “Low wage families and Oregon as a whole would be better off if the state did more to remove the obstacles that get in the way of families accessing this tax credit.”

The Oregon Center for Public Policy (www.ocpp.org) is a non-partisan, non-profit institute that does in-depth research and analysis on budget, tax and economic issues. The Center’s goal is to improve decision making and generate more opportunities for all Oregonians.