Originally posted in RealClear Policy
Extreme weather events, such as Tropical Storm Florence and Hurricane Michael, highlight a heavy truth about ongoing climate change: They hit low-income communities the hardest. And the future may be bleaker still.
As the earth continues to warm, Americans will experience more intense and costly storms — in addition to a host of other profound and detrimental impacts. Alongside the ambitious and comprehensive action urgently needed to limit climate change and its consequences, policymakers can take smaller steps now to begin to protect and empower the most vulnerable communities in this country.
A viable tool to do just that is a reformed Earned Income Tax Credit (EITC). Created in 1975 as a program that encourages work and supplements family earnings, the EITC offers low- and moderate-income workers a tax credit that varies by family size and annual income, and is paid out regardless of tax liability. In 2016 alone, the EITC lifted around 6 million people — including 3 million children — out of poverty, while reducing the severity of poverty for another 19 million people. Today the EITC is one the country’s most effective and widely supported anti-poverty programs, but as climate change continues to be a growing determinant of poverty and inequality, we must consider how the EITC can help in the fight.
One key EITC reform should be to provide more frequent payments in the form of a partial early refund. Severe climate impacts produce significant, unexpected costs through displacement, harmful health effects, and property damage, as well as long-term losses of incomes and livelihood opportunities. Currently, the EITC is paid as an annual lump sum during tax return season. However, to better help lower-income households absorb the impact of financial shocks, EITC payments could be provided more frequently via quarterly — much like the Chicago pilot model — or even monthly payments via electronic payroll processing. The key advantage of providing the EITC at accelerated periodic payments is to help households absorb unforeseen expenses throughout the year. According to the Federal Reserve Bank, four in 10 adults say that they would struggle to deal with an unexpected expense of $400 without selling something or borrowing money.
In addition to accelerated payments, policymakers should also consider permanently increasing the tax credit that disaster-struck families can claim, in order to offset income losses which may take weeks to fully recover after disasters. In the past, the IRS allowed households affected by Hurricanes Harvey, Irma, and Maria to claim the EITC or a larger than usual credit through a special computation method. The measure, however, was implemented on a case-by-case basis. If it were made permanent, to cover federally declared disaster areas, the EITC could be dependable and timely for burdened families in the prolonged financial recuperation process. Currently, the next closest direct cash transfer solution is the IRS’s casualty loss break. This measure, however, is not as effective: The break only covers the net cost of damaged physical property after insurance, failing to soften the financial burdens incurred through a loss of earnings from work, costs for travel and lodging, and other disaster-related expenses.
In the past, Congress and advocates have agreed that the EITC is a multi-functional anti-poverty tool. For example, in 2009, Congressman Henry Waxman (D-CA) and Senator Ed Markey (D-MA) proposed the American Clean Energy and Security Act, which included an expanded EITC to protect the economic security of lower-income households. When enacted alongside a cap-and-trade climate policy, an expanded EITC along with other transfers helped the lowest quintile actually save money. Similarly, a study by the Brookings Institution found that a policy package containing a carbon tax and an expanded EITC could significantly benefit low-income households while also providing strong work incentives and environmental benefits. Moreover, many advocates champion both increasing the EITC and the minimum wage for the often forgotten group of workers not raising children.
The EITC cannot, of course, be the only measure adopted to ensure equity in our disaster management, environmental, and tax policies. The EITC should be integrated into a wider, well-designed strategy to promote environmental sustainability and social equity. Other measures needed to move towards an equitable and sustainable future may include participatory decision-making processes, equitable transit-oriented development, and subsidized public transportation fares.
In addition to the federal EITC, 29 states and the District of Columbia have established state EITC’s which could enact some of the reforms outlined here in the absence of federal leadership.
This November, voters have an opportunity to advance environmental and economic security. We need leaders at every level of government who will act to limit climate change and the catastrophic consequences it will have. Their policy decisions will have a profound impact on how climate change will shape poverty and inequality in America.