The Oregon Earned Income Credit’s Impact on Child Poverty

Oregon has a refundable earned income tax credit (OEIC) that is equal to 8 percent of the Federal Earned Income Tax Credit (EITC). In 2017, Oregon introduced a unique supplement to the OEIC that provided an additional 3% of the Federal EITC to families with children under age 3. To date, there has been no research examining the impact of the OEIC on child poverty. Using data from the Current Population Survey, we simulate the static effects of this unique state OEIC on overall poverty, child poverty, and early child poverty rates in Oregon. We find that the OEIC does not yield a change in the estimated headcount poverty rate for either children or young children. However, focusing exclusively on changes in poverty rates underestimates the impact of the OEIC. The overall estimated impact on the poverty gap and poverty severity is greater – about 2 to 4 percent. Children and young children in families closer to the poverty threshold experience reductions in the poverty gap and poverty severity by about 6 to 9 percent. We tested four policy simulations and found that a simulated OEIC set at 11% of EITC for children and 29% for young children would significantly decrease the child and young child poverty rates by 4 percent and 9 percent, respectively. To reduce more poverty via the OEIC would require substantially more resources which may not be feasible.