Written by Janet Kiplinger Ciccone
Associate Director, Communications and Marketing
College of Education and Human Ecology
Amber Broadus moves around her kitchen as she speaks, radiating energy and enthusiasm. The laughter of her four children, ages 4-18, ripples from an adjoining room. She periodically casts a smile their way. The 36-year-old recalls how, in her younger years, she could barely make ends meet.
Back then, with a low-paying job and young children, she struggled to pay rent and utilities. The challenge of keeping her car filled with gas, paying for its breakdowns and monthly insurance, weighed heavily on her. After all those expenses, she could scarcely put food on the table.
“I was only making $10 an hour,” she said. Even when she got a $2.50 per hour raise, it wasn’t enough.
When she found out about the Earned Income Tax Credit, she saw it as a lifeline.
“This federal credit is the largest anti-poverty program in the United States,” said John Glenn College of Public Affairs Assistant Professor Lauren Jones, who studies government programs that affect child and family well-being. She also has a faculty appointment in the College of Education and Human Ecology.
Jones doesn’t see the credit as perfect; however, “in the best of times, it has lifted over 10 million people out of poverty,” she said.
Begun in the 1970s and expanded during the 1990s welfare reform, the credit incentivizes work. For low earners, the more a person earns, the larger the credit on the federal tax return. Eligible children increase the credit. Many states, including Ohio, add to the benefit.
Timing Is Money: A Little Extra Can Help Avoid Debt
To see the effect of the Earned Income Tax Credit (EITC) on credit card debt, Jones and a colleague studied data of 5,975 families from the Consumer Finance Monthly survey from 2006 to 2013.
They found that among families receiving the EITC, credit card debt levels were about 60 percent lower during tax season as compared to the rest of the year. Many families receive the credit in their tax refund.
Although the tax-time funds let them reduce or pay off past-due bills, Jones said, the families apparently strained to make ends meet during the rest of the year. They managed by using credit cards or other types of loans to close the gap. That strategy added high-interest charges, reducing buying power.
In 2019, when Jones published her findings in Economic Inquiry, she recommended that families receive the credit monthly. By boosting monthly income, the need to go into debt to make ends meet would decrease, Jones said. During the pandemic, offering the credit monthly also would have helped fuel economic recovery.
Broadus, who eventually became the community initiative coordinator for the YMCA of Greater Columbus, learned a strategy to receive the credit monthly. Once she qualified for the tax credit, she estimated its annual value and adjusted her tax exemptions so that she received one-twelfth of the credit in each monthly paycheck.
This strategy isn’t for people who make so little that they pay no federal income tax, Jones said. But Broadus, because she did, could receive the extra spending power regularly. “It might be only $100 or so,” Broadus said, “but that can equal an extra part-time job. It can be enough to pay your car insurance every month, or you can save it.”
This problem-solving mindset has allowed Broadus to gather assets for her family over the years. “You learn to monetize these resources,” she said. “Now, at the Y, I help other people do this. You shouldn’t have to worry about waking up and having nothing.”
Studying the Effect of Another Family Benefit: Medicaid
Medicaid, which was expanded under the Affordable Care Act, provides many people with a buffer against unexpected health expenses. Broadus was a good example.
“Looking back, I didn’t make enough to purchase health insurance,” she said. “If we hadn’t had Medicaid, with some of the (health) issues (my four children) had, I don’t know how I would have managed.”
Jones wanted to know more about the health program. “Our question was, did the benefits of the act extend beyond providing health care coverage?” she said.
Working with her colleague, Associate Professor Tansel Yilmazer in education and human ecology, Jones advised now-alumna Guangyi Wang in her dissertation research. Wang’s study compared how the Medicaid expansion affected homeownership rates in states that increased access to the insurance versus states that did not.
The logic: If you’re thinking about whether you can afford to buy a home, Jones said, part of that decision is how much financial buffer you have against catastrophic health events. If health insurance covers such expenses, money in the family budget is available for another purpose.
Based on data from 1.2 million households in the 2009-2017 American Community Survey, the researchers found about 215,000 households had gained Medicaid access.
“Among these people, we found increasing homeownership rates,” Jones said, “especially among older adults in the over 50 age range.”
Although Broadus is still in her 30s, Medicaid was one of several benefits that helped her recently become the proud owner of a home with Habitat for Humanity Mid-Ohio.
Habitat homes are not free. Broadus had to save as well as borrow for a down payment, put in physical work hours on her home and qualify for a mortgage. She did it all, thanks in part to these public programs. She feels blessed, she said.
We All Benefit When Family Financial Stability Increases
“Our lives are interconnected,” Jones said, emphasizing the beneficial effects of public policy programs. “Many of the social safety net programs that our country offers pay for themselves. The effects are so far reaching, many increase the financial stability in households.”
Today, Broadus has advanced by learning to benefit from the public programs and working hard in her career. With a recent promotion to director of the YMCA’s Y without Walls program, her family is stable. She knows that she will lose access to these public programs, but that’s the intention of lifting people out of poverty.
“Now I can rely on myself,” Broadus said. “I’ve built assets that have true value.”