Expanding Maryland’s Earned Income Tax Credit Will Benefit Families and the Economy
Position Statement Supporting House Bill 585
Given before the House Ways and Means Committee
The Earned Income Tax Credit is a commonsense tax break that helps people who work but struggle to get by due to low wages and also boosts the economy. However, Maryland’s credit isn’t as effective as it could be for workers who aren’t raising children. Increasing the value of the credit in Maryland would create greater economic stability for low-wage workers now largely left out of this effective anti-poverty tool while also supporting local businesses. For these reasons, the Maryland Center on Economic Policy supports House Bill 585.
Research continues to show that the EITC is one of the most effective anti-poverty tools we have. Maryland’s current EITC offers an essential hand up for thousands of working families but it is not as effective for thousands of other low-wage workers. Workers who don’t have children and those who don’t claim a child as a dependent on their taxes get a very small credit – an average of about $90 – even if they have very low incomes. In fact, many people who work for very low wages go deeper into poverty because they don’t qualify for a meaningful tax break.[1]
House Bill 585 would help change that for more than 280,000 Marylanders who are now struggling to get by on low wages. They would receive an average tax credit of about $282 – more than three times the average under current law – up to a maximum of $520. This would place the credit more in line with what working families receive, helping low-income individuals pay for essential expenses like food, utilities or car repairs.
The federal EITC was highly successful in the 1990s at helping more single mothers start working and continue to work, and many researchers believe that expanding the credit would have a similarly positive effect for young men and women with lower levels of education, a segment of the population that is still seeing lower levels of employment, despite the overall low unemployment rate.[2] That’s because the credit increases with each dollar people with very low incomes earn, up to a point, and then phases out when a worker reaches a modest income level.
Expanding the tax credit would also benefit Maryland businesses. Because EITC recipients have very low incomes, they are most likely to spend their tax refunds on basic necessities at businesses in their community. Every dollar invested in the EITC generates $1.23 of economic activity, according to one estimate.[3]
Equity Analysis: The EITC is a powerful tool for dismantling racial barriers
Expanding the EITC would also make our tax system more equitable. The lowest-income Marylanders now pay about 9.8 percent of their income in state and local taxes – a greater share of their income than the wealthiest 1 percent of Marylanders (those earning more than $534,800 per year).[4] Combined with House Bill 584, House Bill 585 would take a meaningful step towards correcting this imbalance.
Due largely to various structural barriers to opportunity, Black and Latinx workers are far more likely than white workers to earn poverty-level wages and are therefore more likely to qualify for the EITC. While state and federal EITCs serve a larger number of white households than households in any other racial or ethnic group, they serve a larger proportion of people of color. EITCs also have a disproportionate impact in reducing poverty rates among households of color[5].
For these reasons, the Maryland Center on Economic Policy respectfully requests that the Ways and Means Committee make a favorable report on House Bill 585.
| Current Law | Post-Expansion | ||||
| District | EITC Returns No Children |
Total MD EITC No Children |
EITC Returns No Children |
Total MD EITC No Children |
|
| Post-Expansion | Change | ||||
| MD 01A | 1,300 | $114,000 | 2,500 | $679,000 | $565,000 |
| MD 01B | 1,300 | $113,000 | 2,500 | $669,000 | $557,000 |
| MD 01C | 1,300 | $113,000 | 2,400 | $672,000 | $559,000 |
| MD 02A | 2,500 | $223,000 | 4,700 | $1.3 million | $1.1 million |
| MD 02B | 1,400 | $126,000 | 2,700 | $746,000 | $620,000 |
| MD 03A | 2,100 | $188,000 | 4,000 | $1.1 million | $927,000 |
| MD 03B | 800 | $70,000 | 1,500 | $415,000 | $345,000 |
| MD 04 | 2,400 | $209,000 | 4,500 | $1.2 million | $1.0 million |
| MD 05 | 2,600 | $231,000 | 5,100 | $1.4 million | $1.1 million |
| MD 06 | 4,100 | $378,000 | 7,800 | $2.2 million | $1.9 million |
| MD 07 | 2,600 | $237,000 | 4,900 | $1.4 million | $1.2 million |
| MD 08 | 3,500 | $321,000 | 6,600 | $1.9 million | $1.6 million |
| MD 09A | 1,200 | $106,000 | 2,300 | $629,000 | $523,000 |
| MD 09B | 700 | $61,000 | 1,300 | $363,000 | $302,000 |
| MD 10 | 3,300 | $307,000 | 6,400 | $1.8 million | $1.5 million |
| MD 11 | 2,500 | $225,000 | 4,700 | $1.3 million | $1.1 million |
| MD 12 | 3,000 | $273,000 | 5,800 | $1.6 million | $1.3 million |
| MD 13 | 2,600 | $236,000 | 5,000 | $1.4 million | $1.2 million |
| MD 14 | 2,900 | $279,000 | 5,600 | $1.7 million | $1.4 million |
| MD 15 | 2,300 | $209,000 | 4,300 | $1.2 million | $1.0 million |
| MD 16 | 1,500 | $140,000 | 2,800 | $830,000 | $690,000 |
| MD 17 | 3,200 | $293,000 | 6,100 | $1.7 million | $1.4 million |
| MD 18 | 3,000 | $279,000 | 5,700 | $1.7 million | $1.4 million |
| MD 19 | 3,700 | $353,000 | 7,100 | $2.1 million | $1.7 million |
| MD 20 | 4,400 | $418,000 | 8,400 | $2.5 million | $2.1 million |
| MD 21 | 3,300 | $308,000 | 6,300 | $1.8 million | $1.5 million |
| MD 22 | 4,200 | $381,000 | 8,000 | $2.3 million | $1.9 million |
| MD 23A | 1,000 | $90,000 | 1,900 | $532,000 | $442,000 |
| MD 23B | 1,600 | $142,000 | 3,000 | $846,000 | $704,000 |
| MD 24 | 3,300 | $296,000 | 6,300 | $1.8 million | $1.5 million |
| MD 25 | 3,000 | $266,000 | 5,700 | $1.6 million | $1.3 million |
| MD 26 | 3,100 | $286,000 | 6,000 | $1.7 million | $1.4 million |
| MD 27A | 900 | $76,000 | 1,700 | $454,000 | $378,000 |
| MD 27B | 700 | $62,000 | 1,400 | $370,000 | $308,000 |
| MD 27C | 900 | $78,000 | 1,700 | $464,000 | $386,000 |
| MD 28 | 2,700 | $242,000 | 5,100 | $1.4 million | $1.2 million |
| MD 29A | 700 | $58,000 | 1,200 | $346,000 | $288,000 |
| MD 29B | 800 | $76,000 | 1,600 | $451,000 | $375,000 |
| MD 29C | 700 | $66,000 | 1,400 | $394,000 | $328,000 |
| MD 30A | 1,700 | $154,000 | 3,200 | $913,000 | $759,000 |
| MD 30B | 700 | $64,000 | 1,400 | $382,000 | $317,000 |
| MD 31A | 1,300 | $121,000 | 2,500 | $719,000 | $598,000 |
| MD 31B | 1,800 | $164,000 | 3,500 | $973,000 | $809,000 |
| MD 32 | 3,100 | $280,000 | 5,900 | $1.7 million | $1.4 million |
| MD 33 | 2,000 | $177,000 | 3,800 | $1.1 million | $877,000 |
| MD 34A | 2,100 | $183,000 | 4,000 | $1.1 million | $904,000 |
| MD 34B | 800 | $65,000 | 1,500 | $389,000 | $323,000 |
| MD 35A | 1,000 | $88,000 | 1,800 | $523,000 | $435,000 |
| MD 35B | 1,700 | $145,000 | 3,200 | $861,000 | $716,000 |
| MD 36 | 2,700 | $244,000 | 5,300 | $1.4 million | $1.2 million |
| MD 37A | 1,500 | $137,000 | 2,900 | $816,000 | $679,000 |
| MD 37B | 2,400 | $222,000 | 4,600 | $1.3 million | $1.1 million |
| MD 38A | 1,400 | $126,000 | 2,700 | $749,000 | $623,000 |
| MD 38B | 1,700 | $150,000 | 3,300 | $890,000 | $740,000 |
| MD 38C | 1,400 | $118,000 | 2,600 | $701,000 | $583,000 |
| MD 39 | 3,500 | $321,000 | 6,700 | $1.9 million | $1.6 million |
| MD 40 | 4,200 | $381,000 | 8,100 | $2.3 million | $1.9 million |
| MD 41 | 3,300 | $300,000 | 6,400 | $1.8 million | $1.5 million |
| MD 42A | 900 | $80,000 | 1,700 | $475,000 | $395,000 |
| MD 42B | 1,600 | $146,000 | 3,100 | $867,000 | $721,000 |
| MD 43 | 3,700 | $322,000 | 7,000 | $1.9 million | $1.6 million |
| MD 44A | 1,400 | $127,000 | 2,700 | $757,000 | $629,000 |
| MD 44B | 2,200 | $203,000 | 4,200 | $1.2 million | $1.0 million |
| MD 45 | 4,100 | $364,000 | 7,800 | $2.2 million | $1.8 million |
| MD 46 | 3,700 | $337,000 | 7,100 | $2.0 million | $1.7 million |
| MD 47A | 2,900 | $264,000 | 5,500 | $1.6 million | $1.3 million |
| MD 47B | 1,400 | $126,000 | 2,600 | $746,000 | $620,000 |
| Statewide | 147,000 | $13.3 million | 281,300 | $79.2 million | $65.9 million |
[1] Chuck Marr and Chy-Ching Huang, “Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty.” Center on Budget and Policy Priorities. February 20, 2015. http://www.cbpp.org/research/strengthening-the-eitc-for-childless-workers-would-promote-work-and-reduce-poverty
[2] Chuck Marr et al. “EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds.” Center on Budget and Policy Priorities. October 1, 2015. http://www.cbpp.org/research/federal-tax/eitc-and-child-tax-credit-promote-work-reduce-poverty-and-support-childrens
[3] Mark Zandi, “An Analysis of the Obama Jobs Plan.” Moody’s Analytics, Sept. 9, 2011. https://www.economy.com/dismal/analysis/free/224641
[4] Institute on Taxation and Economic Policy, “Who Pays? 6th Edition, State-by-state data,” Oct. 17, 2018, https://itep.org/whopays-map/
[5] Michael Leachman et. al. “Advancing Racial Equity With State Tax Policy,” Center on Budget and Policy Priorities, Nov. 15, 2018. https://www.cbpp.org/research/state-budget-and-tax/advancing-racial-equity-with-state-tax-policy
