The Illinois General Assembly got it right when it voted in December to double the state’s earned income tax credit (EITC). As the 2012 tax season approaches, low-income taxpayers in Illinois will receive, on average, $100 extra per year.
The EITC is a refundable income tax credit, which is available to low-income families on their federal income taxes. The American Recovery and Reinvestment Act (ARRA) provided a temporary increase in EITC and expanded the credit for workers with three or more qualifying children for the 2009 and 2010 tax years. Many states also provide a state EITC, usually based on a percentage of the federal credit. Previously, Illinois had one the smallest EITCs among all the states at only 5% of the federal EITC.
In 2010, 46 million Americans lived in poverty, the highest number in our country’s history. The EITC, the government’s largest anti-poverty program, has been credited with lifting millions of people out of poverty. In fact, when President Reagan signed the federal EITC into law, he called it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.” In Illinois, for example, over 950,000 families benefited from the EITC in 2010, and experts estimate that number will climb to 1 million this year due to the economic downturn.
We commend Illinois and Governor Quinn for taking such concrete steps by increasing the EITC. Unfortunately other states are not being so wise. Oklahoma, Indiana, Kansas, and others are proposing legislation to eliminate the EITC, while Michigan is attempting to reduce the program by 70%.
Oklahoma, for instance, has created a tax task force that has recommended that the state abolish personal income taxes all together, along with the EITC. If this tax package passes, 67% of Oklahoma’s citizens will pay higher taxes, and the 80% who rely on EITC refunds for a boost at tax time won’t receive them. Abolishing the personal income tax would further impoverish these families since sales and use taxes or other taxes might be increased to cover this lost tax revenue.
A similar story is unfolding in Indiana, where the EITC has proven to be a successful measure in stabilizing the incomes of nearly 500,000 low-income working Hoosiers who have felt the devastating affects of increased poverty and decreased wages as a result of the Great Recession. In Kansas, Governor Sam Brownback claims that fraud is the reason to eliminate the EITC; however advocates and legislators strongly disagree. Without this tax credit, 4,000 more Kansas children will live under the poverty line, and families will be denied the $90 million in credits. The result would be devastating for these families and children.
The EITC is beneficial not only because it puts extra money in the pockets of those in need, but also because it includes work incentives, grows the economy and can help lift families out of poverty. The country has not yet recovered from the recession’s economic fallout, and now is not the time to cut such vital support for the most vulnerable populations.
EITC Awareness Day is today, January 27, 2012. This is a national, grassroots effort spotlighting this potentially life-changing tax credit. Join with other charitable organizations, elected officials, state and local governments, employers, and other interested parties to educate your communities about the EITC, encourage those who are eligible to apply for it, and prevent it from being cut.