Federal Earned Income Tax Credit Expansion Would Help Maryland’s Workers and Economy
Recent weeks have seen promising developments at the state and national level regarding the Earned Income Tax Credit(EITC), an important credit for low and moderate income working people. The EITC helps offset federal payroll and income taxes, reduces poverty and income inequality, strengthen work incentives, and gives a boost to Maryland’s economy.
At the federal level, President Obama’s Fiscal Year 2015 budget calls for the EITC to include more adults without children, who currently receive little or nothing from the EITC. Doing so would help 210,000 people in Marylandby substantially increasing their after-tax incomes and incentive to work. The President’s budget would also make workers between the ages of 21 and 25 eligible who currently are excluded. This is especially important for recent graduates with student debt and other young people who face multiple challenges when beginning their working careers, helping them gain a foothold in the economy.
Currently, a childless adult working full time at the minimum wage pays significant federal income and payroll taxes, but receives an EITC of less than $30. For families with children, by contrast, the EITC, when combined with the Child Tax Credit (CTC) is a powerful anti-poverty tool. Between 2010 and 2012, the two credits lifted an average of 126,000 Marylanders–including 64,000 children—out of poverty each year.
The President’s proposal will also significantly help low-income working families with children by making several temporary improvements to the EITC and CTC permanent. These improvements, first enacted in 2009 and slated to expire in 2017, have made more low-income working families eligible and boosted the credit for many others. Last year, 154,285 families in Maryland benefited from these improvements, and on average each year over 2009 to 2012, they lifted an another 14,200 Marylanders, including 8,400 children, out of poverty.
The EITC has a proven track record of boosting employment among parents. In addition, research has shown that the EITC also has important positive long-term impacts on children — helping them to do better in school and boosting college attendance rates. It would also give our economy a boost. Eligible workers will get to keep more of what they earn and, in turn, spend those dollars here in our state.
Congress should take the next step and approve the President’s proposal to improve these important tax credits to encourage work, reduce poverty, and invest in Maryland’s future.
Maryland is also one of 25 states to offer a supplemental Earned Income Tax Credit. Check back here for more on legislation in Annapolis to expand this important credit for working Marylanders.
