Today we will observe Veterans Day and honor the men and women who have served to preserve our freedom. Another way to honor our veterans this year is to help ensure that they and their families are financially secure. Oklahoma is home to more than 260,000 veterans, and good policy choices like restoring the Oklahoma Earned Income Tax Credit (EITC) would help them and their communities be economically stable.
The EITC benefits thousands of veteran households in our state
An estimated 24,748 veteran households in Oklahoma claim the EITC, and for many of them, it is a significant financial boost. For a single parent with one child at home making $10.50 an hour, the state credit is worth $147.75. A married couple earning $39,463 (the median income for a veteran in Oklahoma) with two children will get a credit of $126.55. That money helps to pay down debt, purchase large items (like a new appliance), or buy essentials such as school supplies, shoes, baby formula, and more. In short, families are able to purchase household and other items that they had been putting off because they weren’t able to afford them.
Low- and moderate-income working families have been struggling for decades to make ends meet with wages that aren’t growing enough to keep pace with the rising costs of living. Our EITC provides some much-needed yearly relief in that struggle. Unfortunately, the Oklahoma EITC is less valuable than it used to be. That’s because the Legislature cut the credit in 2016 by making in nonrefundable, which means the balance is no longer refunded to them if the credit is more than the amount the family owes in income taxes.
Refundability is critical to the effectiveness of the EITC. Without it, the credit does far less to boost the economic security of low- and moderate-income working families. It reduces the amount they owe in income tax, but without refundability the EITC is less effective at supporting low-income families as they work to save and get ahead.
Restoring the EITC would make veterans and all working Oklahoma families better off
In the past three sessions, the Legislature has considered restoring the EITC to its full value, but they have yet to act. This means working families, including the families of Oklahoma’s veterans, are still struggling more than necessary. When we consider all the taxes Oklahoma families pay (sales, property, and income tax), Oklahoma is not a low-tax state for many of our neighbors. Low- and moderate-wage earners are paying the highest percentage of their income in total taxes. The lowest 20 percent of earners are paying the most (13.2 percent of income) in taxes, closely followed by the second 20 percent who are paying 11.2 percent of their income, and the middle 20 percent paying 10.7 percent of their income. When compared to the highest earners who pay only 6.2 percent, Oklahoma’s tax system clearly asks the most of those that make the least.
Restoring the refundability of the EITC would maximize its value and is an important step to offset the high amount of sales tax (especially on groceries) paid by low-income working families. This includes nearly 25,000 veteran households that use this important credit. Oklahoma should make this choice to help improve the lives of our low- and moderate-income neighbors. It’s long overdue.