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.
Statement from our Executive Director, Jim Horan, on House and Senate Passage of a Raise to the Minimum Wage (Senate Bill 32)
Hartford, CT - Today, both chambers of the Connecticut General Assembly passed SB 32, a bill which increases the state's minimum wage to $10.10 by 2017 and provides a meaningful raise to our lowest income families. With these votes, SB 32 is now being transmitted to the Governor, and once signed, the State of Connecticut will have the highest enacted minimum wage in the country. We applaud our state lawmakers for their leadership on this issue, and for providing a strong example to the rest of the country and Congress.
This increase in the minimum wage will directly help 140,000 workers, many who are women with children, move out of poverty. Under Connecticut's current minimum wage of $8.70, a minimum wage worker working full time, 52 weeks a year, earns only $18,096 a year. The federal poverty level for a family of three (for example a mother, and two children) is $19,790. With the increased minimum wage of $10.10, this same mother will now earn $21,008 a year. This higher wage means greater financial stability for families, reduced need for government safety net programs, and higher earnings for students who are working to pay for college.
We thank Governor Malloy for his leadership on raising the minimum wage to $10.10 and the members of both the House and Senate for passing Senate Bill 32. Connecticut is a leading state in addressing poverty and promoting economic success through progressive policy change, including the state EITC and paid sick days, and now this increase in the minimum wage.
The Connecticut Association for Human Services (CAHS) is a nonprofit policy and program organization that promotes family economic security strategies to empower low-income working families to achieve financial independence. Our mission is to end poverty and engage, equip, and empower all families in Connecticut to build a secure future.
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.
The new census numbers are out, and include some surprising, sobering facts. Poverty remains unchanged; incomes are still still flat. A staggering 15% of Americans live under the Federal Poverty Line. The fact that this number stopped increasing like in previous years should not mask the fact that it is still appallingly high.
The number that really should worry us, however, is median household income. Or to be more precise, this graph:
Median household income in the United States of America is lower than at any point since 1989. That is, the median American family had a higher income 24 years ago ($51,681) that in 2012 ($51,017). Even taking into account the fact that adjusting for inflation for long time periods is tricky, these numbers are truly disappointing. The country has created a staggering amount of wealth for the past two decades (the economy is 75% larger today as it was in the late eighties; GDP per capita is 40% higher), but the middle class has barely seen any of it.
Where did the money go? Mostly to those at the top of the income distribution, with those at the very top reaping most of the bounty. The top 1% households earned 20% of the total income generated by the US economy, an unprecedented sum. Middle class wages have stagnated for the past 24 years; those at the very top are making more money than ever before. We have a whole generation of American middle class families that had not seen any progress whatsoever in their standard of living for more than a decade, and the great recession has moved them back to where they were 24 years ago.
The US as a whole generates more wealth today than ever before. Most of us, however, are not seeing this wealth.