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Weekly Round-Up: February 8, 2013 | Tax Credits for Working Families

Tax Credits for Working Families

Weekly Round-Up: February 8, 2013

February 8th, 2013

Here are some highlights from this week’s news on family tax credit issues. Remember – you can also track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

  • This week in New Jersey, the Senate approved by a 27-1 vote a bill (S-2535) to fully restore the state’s Earned Income Tax Credit (EITC) from 20 percent to 25 percent of the federal credit and put on average an additional $120 back into the pockets of working families. Gov. Chris Christie reduced the credit to 20 percent in his FY2011 budget, but last week, as part of his conditional veto of a bill increasing the minimum wage, proposed coupling a restoration of the EITC with a smaller increase to the minimum wage. Three Republicans backed the EITC restoration and 13 abstained from voting on the bill, which will restore the EITC one year ahead of Christie’s proposed restoration. While the bill does not tie the restoration to an increase in the minimum wage, unfortunately, the EITC could still ultimately be part of broader budget discussions. (Last year, Christie line-item vetoed a provision that would have restored the EITC, refusing to sign an EITC increase unless the Democratic legislature accepted an across the board tax cut that he had proposed.) (NJ.com, Politicker NJ 1,2, New Jersey Senate, NJ Biz, New Jersey Spotlight)
  • In Iowa, a Ways and Means subcommittee approved a tax credit bill (House File 1) on a 3-2 party-line vote Wednesday, pushing ahead with House Republican plans to turn $570 million of the state’s estimated $790 million budget surplus into a $369 refundable income tax credit that could be claimed by almost every income earner in Iowa.  Democrats were interested in providing a tax cut to workers earning less than $50,000 a year – a tax cut that could have come through an improvement to the state’s EITC (currently set at only 7 percent of the federal credit). Unlike the EITC, however, this credit would not consider a family’s income or the amount of income tax that they pay, and would be made available to higher-income in addition to low- and middle-income families. (The Gazette, The Des Moines Register)

  • In response to Gov. Peter Shumlin’s budget plan that sought to redirect $17 million from Vermont‘s EITC program to fund child care subsidies, House Speaker Shap Smith and Senate Finance Committee Chairman Tim Ashe have been making the case for decoupling elements of Shumlin’s proposal so that the legislature could consider them separately. “There is a tremendous hesitance to touch the Earned Income Tax Credit, which is the single most effective anti-poverty measure in U.S. history,” Ashe said. “To link the childcare subsidy with a two-thirds deletion of the EITC, I think, are two unrelated policy questions.” (Public Assets Institute, Seven Days)

  • The Wisconsin Budget Project drew an interesting comparison between Wisconsin’s Homestead Credit and the movie “Groundhog Day,” in honor of the recent holiday. WBP pointed out that everything in the state has advanced a year – property taxes and other expenses have increased – while the Homestead Credit formula has remained the same, frozen in time. To provide working families with more property tax relief, WBP is working to convince state lawmakers to pass a bill that annually adjusts the Homestead Credit for inflation, like the rest of the tax code. (Wisconsin Budget Project)

  • The DC Fiscal Policy Institute pointed out that District of Columbia residents that share housing must report their income together when applying for the District’s property tax circuit breaker, referred to as Schedule H, preventing many low-income workers who have roommates from claiming it. Fortunately, legislation passed last December by the DC Council allows residents to apply for Schedule H individually, reporting only their personal income, and taking into consideration their share of rent or property taxes. In order for this helpful reform to continue, however, the DC Council must secure funding for it in the budget for fiscal year 2014. (DC Fiscal Policy Institute)

  • Elaine Maag from the Tax Policy Center voiced her support for a recommendation by the National Taxpayer Advocate in her Annual Report to Congress that calls for separating the work and family incentives in the tax code  by repealing the dependent exemption, Child Tax Credit, and EITC and creating two new refundable credits – a  worker credit and a family credit. Since these three child-related provisions have three sets of rules governing eligibility, this approach would make tax filing simpler and more efficient for low-income families by eliminating the inconsistencies in the law that create confusion over eligibility and prevent people from claiming the deductions and creates for which they are eligible. (Tax Policy Center)

  • The Huffington Post reminded parents of the benefits of claiming the Child Tax Credit and Child and Dependent Care Credit to help offset some of the financial burden of raising children. (The Huffington Post)

  • Casey Mulligan, an economics professor at the University of Chicago, made the case that the EITC is an important part of the safety net, bring to our attention that in 2007, one-quarter of filers with unemployment income received the EITC, while only one-sixth of filers with wage and salary income but no unemployment income claimed the credit. However, many of the unemployed people who received the credit had just recently lost their job and were able to claim the EITC because they were still receiving wages or salary income during the calendar year of their unemployment from their previous job.  (The New York Times)

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