No children? No EITC

While Maryland lawmakers gave low-income working families a helping hand recently by increasing a key tax credit, they need to go a step further and make sure that more workers are eligible for the credit, regardless of whether they are raising children.

Maryland renewed its efforts to protect working families this past legislative session, when the General Assembly voted to increase the refundable portion of the state’s Earned Income Tax Credit (EITC), to 28 percent of the federal credit from 25 percent. This means increased tax refunds for working families who are trying to move out of poverty.

As we reported previously, the economic impact of this is an estimated $19 million boost for Maryland’s economy, since those refunds will be spent locally on necessities like food and clothing. However, for both the federal and state credit, only those with children at home reap the full benefits. Childless workers and non-custodial parents under age 25 are either ineligible for the credit or eligible for one so small it is ineffective. Given that so many Maryland workers are still excluded, we should celebrate this boost to the state EITC by preparing the way to help those excluded from the tax credit.

Despite the nation’s polarized politics, there is a glimmer of opportunity for doing just that, at least at the federal level. Both House Budget Committee Chairman Paul Ryan and President Obama are advocating an expansion and increase in the EITC for childless workers. Their proposed budgets called for:

• Lowering the age of eligibility for the credit to 21 from 25.
• Raising the maximum credit to $1,000.
• Raising the income level for when the credit begins phasing out.

The Obama and Ryan proposals would create opportunities for an estimated half a million people to leave poverty. Additionally, they would reduce the depth of poverty for another 10.1 million. 

Maryland doesn’t have to wait for federal policymakers before acting. Our neighbor the District of Columbia passed legislation this year increasing the maximum EITC for childless workers to about $500 from $200 and making childless workers earning under $23,000 a year eligible for the credit. A D.C resident earning $18,000 will now receive a refund of $102 instead of owing $533 in income taxes. 

Maryland should begin to consider legislation that expands and creates a more robust EITC for childless workers. Some 210,000 childless workers in Maryland would become eligible for an EITC or receive a larger EITC under Obama’s proposal. We clearly have the need. Childless workers are currently the sole group whose taxes take them deeper into poverty. Maryland should look to strengthen economic opportunities for all its workers, regardless of child-rearing decisions. By lowering the age of eligibility, increasing the maximum credit, or increasing the phase-out income amount, Maryland can help move thousands of workers out of poverty.