New bill would devastate a key tax credit for Oklahoma working families

Pregnant woman working in clothes storeYesterday, a letter signed by more than 150 Oklahoma clergy was delivered to lawmakers and Governor Fallin, urging them not to slash key tax credits for working families to fix the state’s revenue problems. They were joined by numerous non-profit and foundation leaders who spoke out against cuts to the Earned Income Tax Credit, Child/Child Care Tax Credit, and Sales Tax Relief Credit.

Later that evening, lawmakers introduced legislation (SB 1604) that would make the state Earned Income Tax Credit (EITC) non-refundable, slashing its benefit for working families by $28.1 million — a cut of nearly 75 percent. Here are some key facts about this proposal – and the actions you can take:

What is the Earned Income Tax Credit?

  • Oklahoma’s state Earned Income Tax Credit matches 5 percent of the federal EITC. The maximum state EITC for a family with two children is $277 and for a family of three children is $312.
  • The credit is designed to encourage work by supplementing earned income from lower-wage jobs. The credit increases as income grows, with the maximum credit going to families making about $18,000. Then the amount phases out as incomes rise to about $45,000 a year. Only working parents and a few working singles can claim the credit.
  • The state EITC was enacted in Oklahoma in 2000 under Governor Frank Keating. The program has always enjoyed strong bipartisan support as a way to boost work and keep working families out of poverty. The state EITC was claimed by more than 330,000 Oklahoma households in 2014 for a total benefit of $39.1 million.
  • The EITC provides a critical boost to the financial security of low-income workers. Many workers use this annual financial boost for asset building. Research shows EITC payment recipients are more likely to use their refund to pay down debt or invest in a savings account. The savings allowed by the EITC have been shown to promote work, reduce poverty and support children’s development.

Making the Earned Income Tax Credit non-refundable would make it much less effective

  • Currently, the Oklahoma EITC is “refundable”, which means families receive the full value of the credit even if it exceeds their income tax liability. Refundability is critical to the success of the EITC because it allows the credit to still reward work and support families even if workers have small state income tax bills. Without this component, the EITC does far less to reduce poverty and encourage work, particularly among workers earning the least.

    “A single mother with two kids working full-time at $10 an hour ($20,800 annually) would see her taxes increase by $231 if the state EITC is made non-refundable. A married couple with 3 children making $20,800 would see a tax increase of $313.”

  • Families who receive the EITC pay more than just income taxes. They all also pay sales taxes and many pay property taxes as well. When you look at all the taxes we pay, the people who qualify for this tax credit pay a much higher percentage of their annual income in taxes than the wealthy. This tax credit helps even this disparity out, but it’s only possible if the tax credit is refundable. If the tax credit is not refundable, it is not able to make up the difference.
  • Nearly two-thirds (62 percent) of Oklahoma families currently receiving the EITC would see their benefits reduced or eliminated if the EITC became non-refundable. The average loss would be $91 per currently benefiting family, according to an analysis by the Institute on Taxation and Economic Policy.
  • The families hardest hit by making the EITC non-refundable would be parents working in low-wage jobs. Many of these same families have seen their hours cut or their wages lowered due to Oklahoma’s economic downturn, and many can only work part-time due to health issues, family responsibilities, limited transportation, or the unavailability of full-time work.

    The EITC is also important for many families headed by a full-time worker. For example, a single mother with two kids working full-time at $10 an hour ($20,800 annually) would see her taxes increase by $231 if the state EITC is made non-refundable. A married couple with 3 children making $20,800 would see a tax increase of $313. Both of these families received $0 from this year’s cut to the top income tax rate.

What you can do

You can use this contact form with sample language to advocate with your legislators and Governor Fallin about protecting the EITC and other broad-based tax credits. You can also share this video to spread the word about the threat to broad-based credits. You can find out more about the campaign to #SaveOurEITC here. To learn about the better options that Oklahoma has to close the budget hole, check out Together Oklahoma’s #DoSomethingOK Campaign.

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ABOUT THE AUTHOR

Gene Perry joined OK Policy in January 2011. He is a native Oklahoman and a citizen of the Cherokee Nation. He graduated from the University of Oklahoma with a B.A. in history and an M.A. in journalism. Gene also serves on the board of the Oklahoma Sustainability Network, is a trustee of the Oklahoma Foundation for Excellence, is a member of Investigative Reporters and Editors, and has chaired the communications advisory committee for the State Priorities Partnership, a nationwide network of state fiscal policy think tanks. He lives in Tulsa with his wife Kara Joy McKee, who is a Tulsa City Councilor.

12 thoughts on “New bill would devastate a key tax credit for Oklahoma working families

  1. Please, do not further hurt the working poor by taking away these credits. Instead, repeal and stop an income tax cut that is reckless in the midst of massive budget shortfalls and restore the top income tax rate on very high incomes. The majority of them have no objections to repealing it.

  2. As a Christian, it is clear to me that all humans are made in the image and likeness of God. Consequently, to create hardship on the less fortunate and disadvantage, known as the poor, is an affront to our Creator and violation of the greatest commandment. We, as Christians, are called on to have compassion on all. However, to create this hardship is the act of a pharisee and a hypocrite. Biblically, this burden SHOULD ONLY BE PLACED ON THOSE WHO CAN BEAR IT! The poor cannot bear this burden. My vote will go to the person who understands this principle.

  3. To decrease tax credits for the poor is morally wrong and fiscally wrong. Those of us who earn more can & should pay more in taxes – and will not leave the state because of them. And sales taxes generally are more of a burden on the poor.

  4. It is as sad statement for Oklahoma if we deprive the most needy in our society by taking away any incentive to contribute or succeed.

  5. These young couples are barely making it now, but are at least trying ..that should be encouraged. It is morally and fiscally to solve problems by taking from the poorest of out society

  6. These people don’t care about anyone but themselves. These comments mean absolutely NOTHING. The only way to stopped the bleeding of our least fortunate is to VOTE THESE REPUGNANTS OUT!!

  7. And yet an income tax break that primarily benefits the wealthiest of our state will still take effect. They are just simply shifting the tax burden to the poor, and if more of us don’t get out and vote this November, it will just continue to happen.

  8. Once again I’m seeing how this state that claims to be sooo Christian is nothing but a bunch of cold, cruel people who frankly want the working class, the elderly, the single moms, and the disabled to die out. It’s a lot like a nazi plan to me but done in a more legal way. When you make people who are barely getting by as it is have even more struggles and less and less money then you know what your doing to them mentally. You are making it where more will choose death than a hopeless life where they feel like they are just a burden no matter how hard they try. What’s frightening is that this si happening to really good, hard working people who work 12-16 hours 7 days a week and many have college degrees but these days we are not paid enough to get buy. My generation is the first to start out life with $50-$100 thousand dollars of student loan debt, we are also expected to help our now elderly baby boomer parent’s and somehow have enough to raise our own families and pay for the increasingly costly food and utilities. It’s insane to expect all of this from us and most the jobs we were promised would be here back in the early 2000’s have been out sourced to countries that can pay workers a dollar a day and use kids in sweatshops. I’m sick of it and I know most are sick of it and something has to be done as these monsters in government make things worse and worse and then attack the poorest Americans to fix the messes that the powerful rich created! Lets wake up America and fight back. What will it take? Seeing young kids starving to death and mothers and fathers standing in bread lines on American streets? Is this what we want for our kids? I look at my 2 year old son with fear for his future in this rotting away nation that seems to be apathetic to the crimes that these rich men are creating. We are headed for a time where once again there will be a rich class and a super poor class. PLease lets ALL not let that happen. Everybody who wants to work a fair days work should be able to do so and get paid a fair, living wage and not be taxed and burdened so much that he/she can’t even afford to have kids anymore. This is no longer a mere threat that might happen in our future. THis is happening right now. If you don’t think it will effect you then what about your elderly parents, your friends, any disabled people and by the way you can become disabled too and have next to nothing. My uncle relies on getting the sales tax credit every year to buy medications and now he won’t be able to so thank you. He is one of the people though that has cancer and is glad for it because he knows that our government wants him to die. It’s sick and twisted but a reality that we are all to blame for unless we do something about it. We might need as a country to learn from our European brothers and sisters on how to get a government’s attention when it’s harming its people.

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