Earned Income Tax Credit helps low-income families (Muskogee Phoenix)

By D.E. Smoot

About 331,000 eligible workers and families in Oklahoma shared $844 million as a result of the federal earned income tax credit, and some of those taxpayers qualified for a refund thanks to a similar state credit. 

 

An estimated 200,000 low-income Oklahoma taxpayers reportedly saw their state refunds shrink this year after lawmakers opted to make the credit nonrefundable. The decision, which was made to plug a $1.3 billion budget hole, meant the credit could be used to offset any taxes that might be owed but the state would keep the remainder. 

The Oklahoma Policy Institute estimated an average loss of about $91 for those families, but noted a single-parent with two children who works full time at a job that pays minimum wage stands to lose $279 this year.

A married couple with two children and an annual household income of $20,000 would lose $260 — recent tax cuts did little to benefit these families.

The earned income tax credit, passed initially in 1975 as a temporary economic stimulus program, is considered an important anti-poverty tool that by most accounts “helps millions of people every year.” Economists say the “credit has proven to be an essential piece of federal policy to promote work and strengthen families,” and Oklahoma adopted the state credit in 2000 with strong bipartisan support. 

“The EITC is an important anti-poverty tax credit that helps millions of people every year,” IRS Commissioner John Koskinen said earlier this year as part of a promotional campaign. “Even though four out of five eligible workers and families benefit from the EITC, millions more miss out because they don’t know about it or don’t realize they’re eligible. 

The credit has proven popular for at least three reasons: 

• Because only people with earned income can claim the credit, it encourages people to enter — and stay — in the workforce.

 

• The federal program, according to studies cited by the Brookings Institution, “lifts millions of working individuals and families out of poverty each year regardless of” where they live while supporting “community financial stability.”

• Workers and families eligible for the credit typically spend refunds on necessary household and deferred expenses and debt payments, both of which result with a financial boon to local economies that have been found to benefit from the increased demand for goods, jobs and sales tax revenue. 

Three bills were introduced this year in the Oklahoma Legislature — two in the House and one in the Senate — in an effort to reverse the decision to make the state credit nonrefundable. All three were sent to committees, where they remained without further action being taken.

Courtney Cullison, an analyst at the Oklahoma Policy Institute, wrote this week that limiting the benefits provided by the earned income tax credit and “is not the right way to address our budget crisis.” Cullison states in her position paper for the Tulsa-based think tank that “those who will pay for it are the least able to afford it,” and studies seem to show local economies also could suffer.

http://www.muskogeephoenix.com/news/earned-income-tax-credit-helps-low-income-families/article_5ae5f802-0a78-52a0-ab84-aa2f74d65af3.html

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