Press Release

EPI Releases Report Examining Benefits of Earned Income and Child Tax Credits

Last updated: May 14, 2024

Earned Income and Child Tax Credits Help Financially Insecure Families and Children Thrive, Boost Local Businesses and the State Economy, and Are Easy to Administer Without Making a Major Dent in the Treasury


EPI policy brief explains how the Earned Income Tax Credit and Child Tax Credit — which put money directly back into the pockets of working families — often allow them to pay for basic needs like food, housing, and healthcare

PROVIDENCE, RI: In Rhode Island, where 61% of single adults and 70% of single parents cannot meet their basic needs with wage and salary income alone (cite), the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are cost-effective tools that working people can use to build better, healthier, less stressful lives. This is the major takeaway of a policy brief released today (URL to brief) by the Economic Progress Institute (EPI) that EPI and the Rhode Island Coalition for Children and Families (RICCF) presented to legislators at the State House.

“EPI believes that working people are the engines of our economy and that when our workers do well, we all do well,” said EPI Executive Director Weayonnoh Nelson-Davies, JD. “Unfortunately, as EPI’s own research has shown, most single adults and single parents struggle to make ends meet. These tax credits are powerful tools to lift working Rhode Islanders out of poverty, improve long-term health and educational outcomes, and empower workers to afford necessities like childcare so they can work and take care of their families. The whole EPI Team appreciates the efforts of State Policy Fellow Kavya Gopinath, who authored this comprehensive brief and is our lead advocate on worker and tribal justice issues.”

“Our children are our future, yet too many families in Rhode Island are struggling to make ends meet,” said Tanja Kubas Meyer, Executive Director of the Rhode Island Coalition for Children and Families. “As child poverty rates rise, it's clear we need immediate action. Increasing the Earned Income Tax Credit and establishing a RI Child Tax Credit are proven solutions to support families with needed additional income. We urge legislators to support these measures to ensure the well-being of Rhode Island's children.”

“Raising this important income tax credit will go toward helping so many residents and small businesses in our state. By raising the tax credit to 30 percent, not only would we be encouraging people to work, but it would also make us a leader in the nation in encouraging and rewarding our residents for their hard work. Everyone for the most part needs a little help these days and for our residents, families, and small businesses, this tax credit would go a very long way,” said Representative William W. O’Brien (District 54, North Providence). Rep. O’Brien’s bill would raise the state’s EITC to 30% from its current 16% for the tax years 2025 and beyond.

“Research shows that the child tax credit directly contributes to the financial stability of families, positively impacts children’s well-being, and reduces child maltreatment,” said Representative Teresa A. Tanzi (District 34, South Kingstown, Narragansett), sponsor of the House bill to establish an annual tax credit of $1,000 per dependent child up to 18 years old. “Increasing families’ income also gives local economies a boost as families gain the financial flexibility that comes from greater economic security. I am pleased to work with tireless advocates like the Economic Progress Institute to advance this critical legislation to help lift Rhode Island children out of poverty.” 

“Providing much-needed income to help our families immediately is an important goal after years of economic stress due to high poverty rates, the pandemic, and inflation,” said Senate Education Committee Chairwoman Sandra Cano (District 8, Pawtucket), who is sponsoring both EITC and CTC legislation in the Senate. “Rhode Island has the opportunity to join Massachusetts in this important policy choice and I thank the Economic Progress Institute for their dedicated support to establish a crucial child tax credit for Rhode Island families.”



Childhood poverty rates in RI: The EITC and CTC are effective anti-poverty measures that have helped millions of people across the United States pay for necessities and invest in their futures. These tax credits put money directly back into the pockets of working families, often allowing them to pay for basic needs like food, housing, and healthcare. Between 2018 and 2022, 14% of children in Rhode Island lived in poverty and those rates were much worse for children of color. According to the Rhode Island Kids Count 2024 Fact Book, 53% of Native American children, 38% of Hispanic children, 22% of Black children, 11% of Asian/Pacific Islander children, and 8% of white children lived in poverty. Rhode Island must reduce its child poverty rates and the EITC and CTC have been proven to do so effectively.

State & federal Earned Income Tax Credits: Rhode Island’s state EITC is currently set at 16% of the federal EITC. The General Assembly voted to increase it to 16% from 15% for the tax year 2024; this 1% increase provided the equivalent of less than two additional dollars per month. Currently, eligible Rhode Islanders receive an average of $295 a year from the state EITC program. Although the EITC is a powerful tool to lift working Rhode Islanders out of poverty, RI has not been on par with the rest of New England. Connecticut and Massachusetts have state EITCs that are at 40% of the federal EITC. Vermont is at 38%, and Maine is at 25% for workers with dependents and 50% for workers without dependents.

Federal Child Tax Credits: The federal Child Tax Credit, which allows working families to claim up to $2,000 per eligible child (under the age of 17) each tax year, helps families offset the cost of raising children. The federal CTC was expanded for one year in 2021 under the American Rescue Plan Act (ARPA). The maximum credit amount increased from $2,000 to $3,600 for children under 6 and from $2000 to $3,000 for children ages 6-17. Also, the credit was made fully refundable, meaning that those who had low or no earnings had access to the full federal credit for the first time. Families earning up to $125,000 were eligible to claim the full credit. A large majority of low-income families used the credit to buy food, pay utility bills, make rent, buy clothing, and cover education costs. In 2021, the expanded child tax credit under ARPA cut child poverty rates almost in half — reaching a record low of 5.2%. When the ARPA expansion ended in 2022, however, poverty rates more than doubled from 5.2% to 12.4%. Unlike Massachusetts, Maine, Vermont, and 12 other states, Rhode Island does not have child tax credits.

Key differences between EITC & CTC: Although they are similar programs with comparable (and very favorable) outcomes, the EITC and CTC differ with respect to who qualifies for them and how they are run. While the EITC aims to boost the incomes of those who are employed but earn low wages, the CTC is intended to help offset the cost of raising children. Therefore, the CTC is only for people with dependents while the EITC is for anyone who is employed. Moreover, the federal EITC is fully refundable, meaning that low-wage workers will get money back from the IRS if the EITC exceeds their tax liability, while the federal CTC is only partly refundable. Finally, state CTCs are usually set as a dollar amount while state EITCs are set as a percentage of the federal EITC. Although the EITC and CTC both exist at the federal level, RI also has a state EITC, while it does not have a state CTC.



The EITC and CTC ensure that working families have the tools to build a better life. Both credits have been proven to significantly reduce poverty, including nearly cutting child poverty rates in half in 2021. In 2018, the federal EITC alone lifted about 5.6 million people above the poverty line, including 3 million children — and made another 16.5 million people, including 6 million children, less poor. Also in 2018, the EITC and CTC combined lifted 10.6 million people and 5.5 million children out of poverty. The tax credits also made 17.5 million people and 6.4 million children less poor.

The EITC and CTC help families — and society — thrive. These tax credits empower people to afford childcare so they can work and take care of their families. Studies have shown that increasing the EITC is linked with improving infant and maternal health. Both tax credits have also been shown to boost school performance and college enrollment. 

The EITC and CTC will stimulate local businesses and the RI economy. Mark Zandi, a renowned national economic forecaster from Moody’s Analytics, identifies a “multiplier effect” for refundable tax credits to low-income earners in the range of 1.22 to 1.26, meaning that every dollar spent generates an additional $1.24 in economic activity. Applying this multiplier to a state EITC set at 30% of the federal credit would add an estimated $64.2 million to the Rhode Island economy, $30 million more than added with the current 16% EITC.

The EITC and CTC are easy to administer and relatively inexpensive. States incur practically no costs for determining eligibility for these credits, because in most cases, families eligible for the federal credit are also eligible for the state credit. Existing refundable EITCs in states with income taxes cost less than 1% of state tax revenues each year. A few hundred dollars for each family make a big difference in their ability to make ends meet without making a major dent in the state’s treasury.

The Economic Progress Institute is a nonpartisan research and policy organization that works to ensure the economic security of low- and modest-income Rhode Islanders. To learn more about The Economic Progress Institute, visit our website.


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