Up To $427 Million In Benefits For South Carolina

Refundable Earned Income Tax Credits could significantly expand support for working families in need

Prenatal-to-3 has published a report estimating the benefits and costs of implementing a refundable state earned income tax credit (EITC) in South Carolina between 10% and 25% of the federal credit, to reach more families than the current 125% nonrefundable EITC alone. This report calculates up to a 10-to-1 benefit to cost ratio for fiscal and human service benefits for South Carolina families, with up to $172 million in possible benefits from a 10% refundable EITC, and up to $427 million from a 25% refundable EITC. The addition of a refundable EITC could help expand coverage to 1 in 6 working families across the state.1

Implementing a Refundable State Earned Income Tax Credit in South Carolina

Key findings

Estimates for a 10% refundable EITC in South Carolina:

  • 10 to 1 benefit-to-cost ratio
  • $172 million in fiscal and human services benefits
  • $265 average annual benefit per household
  • $16 million cost

Estimates for a 25% refundable EITC in South Carolina:

  • 4 to 1 benefit-to-cost ratio
  • $427 million in fiscal and human services benefits
  • $735 average annual benefit per household
  • $101 million cost

For both:

  • Around 1 in 6 SC households would receive some form of EITC (either existing nonrefundable EITC, or new refundable EITC)
  • Families of color could qualify for larger supports, helping to promote equitable outcomes

Defining the earned income tax credit (EITC)

Prenatal-to-3’s report defines the federal earned income tax credit (EITC) as “an anti-poverty program that incentivizes employment in the U.S. The federal EITC credit provides an annual lump-sum tax credit to families with low incomes to reduce or eliminate tax liability. Most states offer a state-level EITC to supplement the federal credit… Research suggests that federal and state EITCs increase employment and earnings, and improve families’ economic, social, and health outcomes. State EITCs can also increase tax revenue and reduce public assistance spending for federal and local governments.” 2,3

Refundable EITCs support more families, promote equitable outcomes

The addition of a refundable state EITC would reach more families in South Carolina than the current nonrefundable EITC alone, expanding the total number of working families covered in South Carolina to 1 in 6 households.

The refundable EITC can also have additional benefits to marginalized communities by helping to address systemic inequities. Many families of color are disproportionately impacted by low income, high tax burdens, and high cost of living relative to household resources. The average household benefit for families of color would therefore be higher than the state average of $265 per household, with an average benefit of $292 per household for Black families and $321 for Hispanic families, using a 10% refundable EITC.

Beneficial impacts of refundable EITCs

Prenatal-to-3 estimates beneficial impacts on a range of economic, social, and health outcomes, including:

  • Child poverty
  • Low birthweight & hospital costs
  • Special education
  • Infant mortality
  • Foster care
  • Educational attainment
  • Child health insurance coverage and outcomes
  • Crime and public safety
  • Adult suicide

The Institute for Child Success and Prenatal-to-3 Policy Impact Center urge policymakers to consider implementing a 10% refundable state earned income tax credit in South Carolina.

Read the full report from Prenatal-to-3 Policy Impact Center (hyperlink report) for more information on the findings and methodology.

References

  1. Prenatal-to-3 Policy Impact Center. (2023). Implementing a Refundable State Earned Income Tax Credit in South Carolina: A Cost-Benefit Analysis. Peabody College of Education and Human Development, Vanderbilt University.
  2. Prenatal-to-3 Policy Impact Center. (2022). 2022 Prenatal-to-3 State Policy Roadmap. Peabody College of Education and Human Development. Vanderbilt University. https://pn3policy.org/pn-3-state-policy-roadmap-2022/.
  3. Prenatal-to-3 Policy Impact Center. (2022). Prenatal-to-3 policy clearinghouse evidence review: State earned income tax credit (ER 05C.1022). Peabody College of Education and Human Development, Vanderbilt University. http://pn3policy.org/policy-clearinghouse/state-earned-income-tax-credit.

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