Money in People's Pockets: How This Funder Network Confronts Economic Hardship

In an election year already marked by debate over government’s failures to support lower-income Americans, the COVID-19 pandemic has sparked frantic argument over how to apply stimulus as millions lose their livelihoods. Fiscal policy, usually the province of Beltway wonks, has taken center stage. The federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which passed in the Senate this week, seeks to inject a record $2 trillion into the U.S. economy, including direct payments of $1,200 to every U.S. resident with an adjusted gross income of up to $75,000, as well as $500 per child. It also raises unemployment benefits by $600 per week for up to four months.

How effective the measure will be for low-income Americans, even in the near term, is a matter of debate. But it’s hard to deny that philanthropy could have been doing a lot more over the years to bolster equity-oriented fiscal policy. After all, government decisions about taxes and spending shape the playing field on poverty and inequality, not to mention a great many other issues. Policies favoring low-income communities from the start reduce the need for philanthropy to fill service gaps downstream. And yet, as we’ve reported, most funders aren’t much interested in supporting work on budget and fiscal policy.

Still, a number of foundations have been in these trenches for a while, backing places like the Center on Budget and Policy Priorities, the Center for American Progress and Prosperity Now (formerly CFED). For those advocates, the federal earned income tax credit (EITC), its state-level equivalents, and similar mechanisms like the child tax credit have long held an important place in fiscal policy’s equity arsenal. By reducing what low-income earners owe in taxes, the EITC effectively puts money back in people’s pockets and has been doing so for nearly 50 years. In 2019, it channeled more than $60 billion to U.S. households.

Though it’s little-known, the EITC Funders Network has been a hub for interested grantmakers over the past two decades. Here’s a bit about its work and how it sees the path ahead.

“Every Make and Model”

The federal EITC dates back to 1975, when Gerald Ford signed it into law. It once enjoyed significant bipartisan support, expanding under Reagan and tripling under Clinton. The Economic Policy Institute has described it as “by far, the most progressive tax expenditure in the income tax code.”

For decades, a group of foundations has supported advocacy and positive messaging around the EITC. The EITC Funders Network came together as many of these affinity groups do, from an informal conversation between grantmakers who find alignment in their giving. According to the network’s coordinator, Ami Nagle, that process started in 2004 with a meeting of over a dozen foundation leaders. The fledgling network started off as a working group under Economic Opportunity Funders (then GIST) and later established itself as an independent affinity group.

Key players back then included Ford, Annie E. Casey and Mott. Those funders also all happen to be steady supporters of the State Priorities Partnership, a decades-old network of advocacy groups that pushes for more equitable budget and tax decisions in the states. Today, the EITC Funders Network boasts a membership of nearly 300 charitable foundations. That includes “every make and model of charitable entity,” Nagle said, and even involved the public sector back when cities like Chicago and New York regularly backed EITC engagement and tax prep. “We like to keep an open platform,” Nagle said.

Nagle stressed the network’s informal nature. No dues are collected, although a number of members provide general support. A notable recent example is the Rockefeller Foundation, which backed the network through its new $36.5 million Equity and Economic Opportunity Initiative. While the EITC Funders Network does not make its membership list public, some other foundations that often fund tax-related asset building include Kellogg, Kresge, Levi Strauss and the Walter and Elise Haas Fund. Local funders like the Silicon Valley Community Foundation are also part of the picture, as well as big banks like JPMorgan Chase and Citi. A glance at the Asset Funders Network’s membership list conveys a sense of the major role financial institutions play in this space.

One of the strengths of the EITC Funders Network is its specific focus—rather unusual for an affinity group—on a particular aspect of public policy and how foundations can weave related advocacy into their broader missions. “We have observed over time that most charitable foundations don’t have an EITC portfolio. It’s a piece of something bigger,” Nagle said. “Being part of the network helps them put those pieces together.”

New Connections and Rapid Responses

Initially, most foundation funding around the EITC centered on raising awareness among potential beneficiaries. Many funders supported nonprofit work to secure the credit for low-income families through the federal government’s free Voluntary Income Tax Assistance (VITA) program. The network has evolved over time, supporting efforts to use the EITC as a gateway for low-income families to learn about other public benefits, or about tools to encourage savings, budgeting and other wise habits. Policy advocacy at the state and federal level is also a growing area of interest throughout the network.

According to Nagle, the network makes available newsletters, webinars and other resources tailored to the perspectives of funders working in asset building. The EITC’s strong footprint and existing infrastructure makes it a natural focal point, but the network also supports funders interested in similar instruments like the low income housing tax credit and the child tax credit. There’s also an annual gathering, which took place in the Pacific Northwest last year in partnership with Grantmakers in Health.

That nexus—between low-income asset building and health—is one area the network has prioritized over the last several years. Given a growing body of research on how tax measures like the EITC impact health outcomes, Nagle wanted to figure out how to “bring health funders into the same room as the more traditional EITC funders.” Following meetings with Grantmakers in Health, the network is currently plotting out what that work might entail in 2020. Another area Nagle wants to explore further is the link between equity (racial, ethnic, gender) and the tax code. The network is working with Economic Opportunity Funders to find ways to build greater understanding of those dynamics in the funding community.

Another interesting project is the network’s EITC Pooled Fund, a grantmaking vehicle it operates in partnership with Economic Opportunity Funders. Since 2012, the pooled fund has awarded around $3.3 million to nonprofits working with the EITC in 31 states. In part, the pooled fund’s mission is to protect and expand existing state EITCs and spread the instrument into new states. Currently, 29 states as well as Puerto Rico and Washington, D.C., have enacted versions of the EITC.

The EITC Pooled Fund has grown substantially since its launch, and now enlists technical support from the Center on Budget and Policy Priorities—a crucial player in this arena—as well as the Hatcher Group. The fund now includes three main vehicles for grants. The first is a rapid response fund established in 2012, which awards “quick infusions” of cash in the $15,000-30,000 range to help ground-level nonprofits overcome emergent challenges. There’s also a Policy Development Fund, launched in 2015 to support state-level work to implant or expand EITCs, with an initial focus on the South. Finally, a Campaign Fund got up and running in 2017 to support state policy networks during urgent “windows of opportunity” for the defense or expansion of state EITCs.

Uncharted Waters

Though policies like the EITC have lost some of the bipartisan support they once enjoyed, this era has also seen formerly “radical” public anti-poverty prescriptions gain political traction. Just look at some of the bigger nonprofits in this space. In addition to older asset building stalwarts like Prosperity Now, the EITC Funders Network now coordinates with new players like the Economic Security Project, a product of the techie left that advocates for bold policies like a cost-of-living refund—reworking the EITC to give workers a guaranteed income.

Judging from what the EITC Funders Network’s been up to, there has clearly been an uptick in funder interest in policy advocacy since those early meetings in 2004. The pooled fund’s Campaign Fund, launched in the Trump era, is just one signpost. The question is whether funders will be able to channel the energy of the moment into a more robust support system for equity-oriented public spending, including tax credits.

The other wild card, of course, is how COVID-19 will affect this landscape. While it’s too early to say anything for certain, the crisis will likely prompt changes in the public’s attitude toward government aid, with consequences for this realm of fiscal policy. “We’re keeping a close eye on EITC-related opportunities to address concerns, and we hope tax [credits] can be a part of solutions in the time to come,” Nagle said. At the same time, she said, “some funders are concerned about the opposite. As the federal or state governments worry about balancing budgets, are they going to cut their EITC programs? Some states have reduced them in the past.”

Related:

Featured