RT Journal Article
SR Electronic
T1 The Rainy Day Earned Income Tax Credit: A Reform to Boost Financial Security by Helping Low-Wage Workers Build Emergency Savings
JF RSF: The Russell Sage Foundation Journal of the Social Sciences
FD Russell Sage Foundation
SP 161
OP 176
DO 10.7758/RSF.2018.4.2.08
VO 4
IS 2
A1 Sarah Halpern-Meekin
A1 Sara Sternberg Greene
A1 Ezra Levin
A1 Kathryn Edin
YR 2018
UL http://www.rsfjournal.org/content/4/2/161.abstract
AB Financial stability depends on emergency savings. Low-wage workers regularly experience drops in income and unexpected expenses. Households with savings absorb these financial shocks but most low-income Americans lack rainy day savings. Therefore, even a small shock, like car repairs, can result in a cascade of events that throws a low-income family into poverty. Nonetheless, existing policies address emergency savings only indirectly. However, the Earned Income Tax Credit (EITC) already functions as an imperfect, makeshift savings tool. This lump sum refund at tax time gives workers a moment of financial slack, but many EITC recipients lack emergency reserves later in the year. By creating a “Rainy Day EITC” component of the existing EITC, policymakers can help low-wage workers build up emergency savings.