On tax deadline day, we want to put a spotlight on a proposal contained in the President's 2015 budget that would expand the federal Earned Income Tax Credit (EITC) for lower-income, childless workers.
As quick background - the federal EITC is a fully refundable[i] tax credit that is targeted to support low- to moderate-income workers. The credit becomes available to workers with their first dollar of earned income, peaks at certain predetermined amounts (which are based on marital status and family size), and phases out until it eventually reaches $0 for higher income earners.
The EITC has been routinely cited as a highly effective tax policy that both encourages and rewards work - and has seen support from both the left and right. Research shows that the credit produces major long term benefits for children that go well beyond a single tax year -- this study finds that children in families who receive the EITC have higher test scores, fewer teen births, and live in better neighborhoods as adults.
However, the EITC falls short, and should do more, when it comes to supporting young and childless workers. Childless workers under age 25 are completely ineligible for the credit and the average credit for qualifying workers between 25 and 64 is less than one-tenth the average credit for families.
Yesterday the Center on Budget and Policy Priorities created an infographic that further demonstrates the problem with the current structure of the EITC:
The Center has found that childless workers are in fact the only group that are pushed further into poverty as a result of the federal tax code.
In his 2015 Budget, the President has proposed reducing the qualifying age to 21 and raising the credit amount available to childless workers (from a max of $500 to a max of $1,000). The President's proposal also raises the phase out point for the EITC for these workers from $15,000 to $18,000. There are also several proposals before Congress that would expand the EITC beyond the changes proposed in the President's budget -- potentially creating even larger credits for these workers.
A change to the federal EITC could also bring a change to our state's EITC -- Connecticut is one of 21 states (there are total 26 states with a state EITC) that sets its tax credit as a percentage of what is offered on the federal level. We know that the combination of a state EITC with the federal credit helps bring an even larger number of families out of poverty. We should be extending this same opportunity, at both levels, to our young and lower-skilled workers who we know are facing an extremely difficult time in this economy and in this job market.
We call on politicians in Washington to adopt these measures, and to provide much needed support to these working Americans.
[i] A fully refundable tax credit is one where a payment will be made by the IRS directly to the taxpayer in the event that the amount of the credit exceeds the individual's income tax liability.
As we continue to follow Governor Malloy's proposal to raise the state minimum wage to $10.10, and the President's effort to do the same on the Federal level, we wanted to share with you some great work that is being done by our friends at the Economic Policy Institute (you can read some of our previous blog coverage on the minimum wage campaign here).
One of the most pervasive myths about the minimum wage (second only to the fear that a raise is a job killer -- in a previous post we shared a number of resources that debunk this misconception) is that it is mostly being earned by teenagers who need spending money. This infographic produced by EPI shows us that this is not the case:
A 2012 analysis produced by EPI told a similar story; in that year EPI determined that if the minimum wage had been raised to $9.80 here in Connecticut over 80% of the effected workforce would have been individuals over age 20.
These minimum wage earners are also disproportionately women. This map from the National Women's Law Center shows that nationally almost two-thirds of minimum wage workers are women, while here in Connecticut, women are six out of every ten minimum wage earners.
So as we can see -- a minimum wage increase is a targeted reform that will help women and families in Connecticut, and across the country, move out of poverty and towards economic stability. Continue to follow us here on the blog, as well as on Twitter and Facebook, for updates on the state and federal campaign.
Yesterday afternoon President Obama stopped by Central Connecticut State University in New Britain where he made his case for increasing the federal minimum wage to $10.10 (current federal minimum wage is set at $7.25, Connecticut's minimum wage is $8.25). Flanked by Governor Dannel Malloy, as well as the Governors from Massachusetts, Vermont, and Rhode Island, the President called on Congress to "give America a raise" and highlighted how the increase would help women and young people.
In our previous post, we discussed the the benefit a wage increase has on both our lowest-earning workers and the state's budget. Several news reports following the event, that can be viewed here and here, featured quotes from Democratic lawmakers indicating the high probability of the legislature passing a minimum wage increase during this legislative session. Tom Foley, the likely Republican candidate in this fall's governor's race, has stated he favors a minimum wage increase. There is also overwhelming public support, with the latest Quinnipiac poll showing voters backing the measure 3-to-1.
An increase in the minimum wage is an important first step in helping our state's families move out of poverty and towards economic security. In future posts, we will discuss other aspects of the President's economic agenda for 2014, which includes a more robust earned income tax credit with new support for single adults, additional job training programs, and expanded early childhood education opportunities.
CONTACT YOUR MEMBERS OF CONGRESS TODAY AND URGE THEM TO PROTECT AND SUPPORT SNAP
Call Your Senators Toll Free: 1-877-698-8228* - You will be directed to the offices of your Senators
Call Your House Members: 202-225-3121 (Capitol Switchboard)
Urge your Members of Congress to speak out in support of SNAP at Committee hearings, caucus meetings, and on the floor of the House and Senate. Members of Congress must oppose any proposals that would change SNAP’s structure or reduce funding, restrict eligibility or reduce benefits. Members should also support SNAP improvements, including the President’s proposal to restore the cut in the ARRA boost. SNAP works – it is responding to increased need and must be strengthened, not weakened, in order to continue to provide critically-needed nutrition assistance.