EDITORIAL: State should expand Earned Income Tax Credit
Feb. 12--Much of the recent debate on Beacon Hill has been centered around ballot initiatives that would cut the state sales tax, increase the minimum wage and take another 4 percent in taxes from those who make more than $1 million a year.
All are ostensibly aimed at putting more money in the pockets of low- and middle-income residents, yet all come with unanswered questions attached.
Several recent studies, for example, have disagreed on whether raising the minimum wage would help low-income and entry-level workers by giving them a raise, or hurt them by prompting employers to cut costs, and therefore jobs. And the state Supreme Judicial Court is still considering the legality of the so-called "millionaires tax."
If lawmakers are serious about helping low- and middle-income families -- especially those with children -- there is a proven way to do it: Expand the state's Earned Income Tax Credit.
Gov. Charlie Baker proposed as much in his 2019 budget plan unveiled last month. Baker would raise the credit to up to 30 percent of what qualifying workers claim on earned income credits on their federal tax returns. The current level sits at 23 percent, up from 15 percent two years ago.
"This would be a doubling of the state's (earned income) credit in three years and could allow qualifying families to keep up to $2,000 of their hard-earned money annually," Baker said earlier this month. The move would help about 450,000 workers across the state.
The EITC rewards working families. It's not a handout -- it's giving taxpayers their money back. According to the nonpartisan Center on Budget and Policy Priorities, "Research indicates that families mostly use the EITC to pay for necessities, repair homes, maintain vehicles that are needed to commute to work, and in some cases, obtain additional education or training to boost their employability and earning power."
"Combined with the federal credit," the center notes, "state EITCs help working families avoid poverty and the hardships it imposes on children."
Unlike the ballot questions, the EITC has a track record of success. Raising the state credit to 23 percent from 15 boosted the average savings from $951 to $1,459 per person.
That is no small amount of money for families struggling with rising rent, heat and health care costs.
"Wages have stagnated for low- and moderate-income workers in Massachusetts, making it increasingly difficult for hard-working parents to make ends meet and provide for their children," said Noah Berger of the Massachusetts Budget and Policy Center. "This program helps push back against that trend."
What's more, Baker's proposed increase in the state credit would help ease the impact of the federal tax reform, which is expected to slow increases in federal credits, budget analysts said.
"Increasing the state EITC would sort of buffer the impact of that," Allison Bovell of the Healthy Families EITC Coalition told reporter Christian Wade.
The program has a secondary effect of boosting the state's economy.
"It's not just a successful anti-poverty program," Bovell said, noting that the recipients spend their money locally. "That money is going right back into the commonwealth."
The sticking point, as always, is how to pay for the program. The Baker administration estimates pushing the credit to 30 percent would cost the state about $65 million a year. Two years ago, Baker proposed paying for it by ending the state's generous film tax credit. Lawmakers shot that down, instead opting to delay a new corporate tax deduction.
Baker's plan would give state lawmakers some time to come up with a way to pay for the expansion -- the move to 30 percent wouldn't go into effect until the 2020 tax year.
That should be plenty of time to come up with a bipartisan solution. It's time to get to work.