Combating crime through taxes – the extended tax allowance for earned income

The Earned Income Tax Credit (EITC) has long been considered one of the most effective anti-poverty programs in the United States, providing much-needed financial relief to millions of low- and middle-income working families. But the benefits of the EITC extend far beyond the immediate economic impact on individual families. Recent research suggests that this social safety net can also play an important role in reducing crime rates, especially in communities where financial pressures are felt most acutely.

As Congress debates the 2025 budget, which includes a significant expansion of the EITC, it is important to recognize that these proposed changes could do more than just assist individuals in need. An expanded EITC could also improve social conditions on a larger scale by addressing some of the root causes of financially motivated crime.

2025 budget proposal and expansion of the EITC

The proposed federal budget for 2025 proposes several expansions of the EITC that reflect a broader commitment to reducing poverty and improving financial security for working families. The expansions are designed to increase the credit amounts for eligible households that fall within the eligibility range—and broaden that range. The latter focuses particularly on single adults without children, who have historically received lower benefits.

The plan calls for increasing the maximum EITC share for workers without children from about $540 to nearly $1,500 and raising the income cap from about $16,000 to about $21,000.

One of the more significant changes in the budget bill is an increase in the maximum amount for families with children, a group that currently receives the majority of EITC spending. This adjustment would provide additional funds to households with precarious budgets. The policy proposal proposes to restore and make permanent the temporary and expired expansion of the EITC from the American Rescue Plan.

This expansion would include full refundability and advanceability of the credit — that is, taxpayers would not be limited to the amount of taxes owed in the credit and would not have to wait until they file their tax returns to receive the credit. This would provide immediate economic relief and help families struggling to manage their households stay afloat.

In addition, the proposal would expand the EITC to more low-income earners without children, nearly tripling the maximum benefit eligibility for this group, which had previously received fewer benefits. The proposed expansions would also include simplifying the application process, making it easier for individuals to apply for and receive the credit.

Expanding the EITC will have wider impacts beyond helping families meet their immediate financial needs—it will also provide low- and middle-income taxpayers with a buffer against future financial shocks. Improved economic security will likely reduce the incidence of poverty-related behavior, including certain types of financial crime, which in turn will contribute to safer and more stable communities.

EITC and crime rates

The link between financial insecurity, welfare reform, and crime is well documented and not limited to the United States. Economically motivated crimes such as burglary and robbery often increase in neighborhoods where residents face significant financial pressure.

The EITC, one of the largest and most effective anti-poverty programs in the United States, has been shown to have an impact on crime rates – particularly in poorer neighborhoods, where its benefits are felt most.

Recent research, including a study by Brigham Brau and colleagues, provides compelling evidence of the EITC's specific and direct impact on crime. Their research, which examined the impact of EITC payouts on crime rates in major U.S. cities such as Chicago, New York City, and Los Angeles, found that burglary and robbery rates declined significantly in the week before and three weeks after the payout.

It is believed that the financial relief provided by the EITC reduces the immediate and acute economic pressures that might otherwise drive a person to commit a crime out of financial need. While the impact on other types of crime was not as significant, the significant decline in property crime meant that the overall effect of the EITC on crime is largely depressing.

In short, by reducing the economic pressures that can lead to certain types of crime, the EITC serves as an important tool for improving public safety in at-risk communities. The expansions to the EITC proposed in the 2025 budget could amplify these crime-reducing effects and contribute to safer neighborhoods and more stable communities.