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Expanding the Earned Income Tax Credit Will Benefit Maryland Workers and the Economy

Position Statement Supporting Senate Bill 263

Given before the Senate Budget and Taxation 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 because the income cap for workers not raising children is too low. A slight increase in the maximum income to qualify for the EITC would create greater economic stability for low-wage workers now left out of this effective anti-poverty tool and also supporting local businesses. For these reasons, the Maryland Center on Economic Policy supports Senate Bill 263.

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. For workers who don’t have children and those who don’t claim their child as a dependent on their taxes, once they earn just over $14,000 per year, they are no longer eligible for the credit. That means someone working full time at Maryland’s current minimum wage and not claiming dependents on their taxes would earn too much to qualify for the EITC, even though they are still earning too little to support themselves. 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].

Senate Bill 263 would help change that for more than 134,000 Marylanders who are now struggling to get by on low wages. The bill would increase the maximum income for the state EITC to $23,540 for single filers.

Expanding the tax credit also benefits 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.[2]

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 Marylanders.[3] Combined with Senate Bill 262, Senate Bill 263 would take a meaningful step towards correcting this imbalance.

For these reasons, the Maryland Center on Economic Policy respectfully requests that the Budget and Taxation Committee make a favorable report on Senate Bill 263.

 

 

Current Law After Expansion
Senate District EITC Returns Total MD EITC EITC Returns Total MD EITC Change
1 3,900 $340,000 7,400 $2.5 million $2.2 million
2 3,900 $347,000 7,400 $2.6 million $2.3 million
3 2,900 $257,000 5,500 $1.9 million $1.7 million
4 2,400 $209,000 4,500 $1.5 million $1.4 million
5 2,600 $231,000 5,100 $1.7 million $1.5 million
6 4,100 $378,000 7,800 $2.8 million $2.5 million
7 2,600 $237,000 4,900 $1.7 million $1.5 million
8 3,500 $321,000 6,600 $2.4 million $2.1 million
9 1,900 $167,000 3,600 $1.2 million $1.1 million
10 3,300 $307,000 6,400 $2.3 million $2.0 million
11 2,500 $225,000 4,700 $1.7 million $1.5 million
12 3,000 $273,000 5,800 $2.0 million $1.8 million
13 2,600 $236,000 5,000 $1.7 million $1.5 million
14 2,900 $279,000 5,600 $2.1 million $1.8 million
15 2,300 $209,000 4,300 $1.5 million $1.4 million
16 1,500 $140,000 2,800 $1.0 million $908,443
17 3,200 $293,000 6,100 $2.2 million $1.9 million
18 3,000 $279,000 5,700 $2.0 million $1.8 million
19 3,700 $353,000 7,100 $2.6 million $2.3 million
20 4,400 $418,000 8,400 $3.1 million $2.7 million
21 3,300 $308,000 6,300 $2.3 million $2.0 million
22 4,200 $381,000 8,000 $2.8 million $2.5 million
23 2,600 $232,000 4,900 $1.7 million $1.5 million
24 3,300 $296,000 6,300 $2.2 million $1.9 million
25 3,000 $266,000 5,700 $2.0 million $1.7 million
26 3,100 $286,000 6,000 $2.1 million $1.9 million
27 2,500 $217,000 4,800 $1.6 million $1.4 million
28 2,700 $242,000 5,100 $1.8 million $1.6 million
29 2,200 $201,000 4,300 $1.5 million $1.3 million
30 2,400 $218,000 4,600 $1.6 million $1.4 million
31 3,100 $285,000 6,000 $2.1 million $1.9 million
32 3,100 $280,000 5,900 $2.1 million $1.8 million
33 2,000 $177,000 3,800 $1.3 million $1.2 million
34 2,900 $249,000 5,500 $1.8 million $1.6 million
35 2,600 $233,000 5,000 $1.7 million $1.5 million
36 2,700 $244,000 5,300 $1.8 million $1.6 million
37 3,900 $360,000 7,500 $2.6 million $2.3 million
38 4,500 $397,000 8,700 $2.9 million $2.6 million
39 3,500 $321,000 6,700 $2.4 million $2.1 million
40 4,200 $381,000 8,100 $2.8 million $2.5 million
41 3,300 $300,000 6,400 $2.2 million $2.0 million
42 2,500 $225,000 4,800 $1.7 million $1.5 million
43 3,700 $322,000 7,000 $2.4 million $2.1 million
44 3,600 $330,000 6,900 $2.4 million $2.1 million
45 4,100 $364,000 7,800 $2.7 million $2.4 million
46 3,700 $337,000 7,100 $2.5 million $2.2 million
47 4,300 $390,000 8,200 $2.9 million $2.5 million
 
Statewide 146,997 $13,338,981 281,293 $79,238,981 $65,900,000

 

[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] Mark Zandi, “An Analysis of the Obama Jobs Plan.” Moody’s Analytics, Sept. 9, 2011. https://www.economy.com/dismal/analysis/free/224641

[3] Institute on Taxation and Economic Policy, “Who Pays? 6th Edition, State-by-state data,” Oct. 17, 2018, https://itep.org/whopays-map/