Implementing a Refundable State Earned Income Tax Credit in South Carolina: A Benefit-Cost Analysis


Analysis created for the Institute for Child Success (ICS)

Research suggests that federal and state earned income tax credits (EITC) increase employment and earnings and improve families’ economic, social, and health outcomes. State EITCs can also increase tax revenue and reduce public assistance spending for federal and local governments.

Eligible tax filers in South Carolina can currently claim a nonrefundable state EITC, with a credit worth 125% of the federal credit beginning in tax year 2023. In this analysis, we estimate the additional costs and benefits to South Carolina of implementing a 10% or 25% refundable EITC, compared to the state’s 125% nonrefundable EITC.

We estimate that, with a 10% refundable state EITC, the average annual benefit per eligible household would be $265. Our analysis demonstrates that the annual public benefits of the elective refundable state EITC program would outweigh its costs, with an estimated ratio of about 10 to 1 with a 10% credit. The program could provide an improvement in the quality of life for workers and families in South Carolina, and a return to the state government through increased economic activity, greater tax revenue, and reduced spending on public assistance and human services programs.

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Recommended Citation

Osborne, C., Skatter, N., Thom, A. (2023). Implementing a Refundable State Earned Income Tax Credit in South Carolina: A Benefit-Cost Analysis. Prenatal-to-3 Policy Impact Center, Vanderbilt University Peabody College of Education and Human Development.

© March 2023, Prenatal-to-3 Policy Impact Center, All Rights Reserved. The Prenatal-to-3 Policy Impact Center at Peabody College of Education and Human Development, Vanderbilt University translates research on the best public investments into state policy actions that produce results for young children and society.


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