EITC Awareness Day (Jan. 27) is an Opportunity to Educate
A young woman juggling an entry-level administrative job and classes at a community college; a divorced dad working 40 hours a week as a custodian to help support his two kids; a veteran trying to make a living back home after serving our country overseas… They, and millions of other hard working Americans, struggle to make ends meet because their jobs pay low wages.
What’s worse, once taxes are taken, many are actually left below the poverty line. Someone working full time at the federal minimum wage earning $12,494—which is right at the poverty line - pays $214 in federal income taxes and $956 in payroll taxes, all while receiving only $184 from the Earned Income Tax Credit (EITC)…not nearly enough to lift them out of poverty that taxes put them into, much less cover living expenses.
During the recent election campaign, political candidates from both parties spoke about wages, trade deals, and our economy—all with the goal of helping those living on the brink. Now in the election’s aftermath, it should be clear to members of both political parties that struggling workers face real challenges and need real solutions.
The need in our state is great. 44% of New York State working households struggled to afford basic household necessities in 2014. That’s according to United Way’s recent ALICE (Asset Limited, Income Constrained, Employed) report*, which examined the needs and hardships of the growing number of working households in our communities with incomes above the Federal Poverty Level but below a basic survival threshold. In Albany County, 38 percent of residents are struggling to make ends meet, and in the City of Albany alone, that figure jumps up to an astonishing 52%.
Even worse: 466,000 workers not raising children in our state—and 7.5 million workers across the nation—are currently taxed into or deeper into poverty, largely because they are left out of the EITC that families with children in the home receive. These are folks with low-wage jobs who are so on the brink that, after taxes, they find themselves actually at or below the poverty level. These are young workers trying to build a strong and stable future. These are working, noncustodial or older parents supporting their children who aren’t living in their home. These are working veterans and active military and working, single New Yorkers.
Right now, millions of hardworking people are missing out on one of the best tools we have to help working Americans escape poverty… the EITC. During the 1990s, EITC expansions did more to raise employment among single mothers with children than either welfare reform or the strong economy. But the EITC fails to provide a meaningful work incentive for workers not raising children in the home.
Moreover, the EITC offers an opportunity for bipartisan cooperation. Expanding the EITC for workers not raising children has champions on both sides of the aisle, including House Speaker Paul Ryan, who says, “We should make sure that in this country it always pays to work. I’d do that by increasing the Earned Income Tax Credit for childless workers.” He goes on to say, “This is a population we want to get into the workforce, and raising the EITC raises the incentives for people to work, and helps bring them into the workforce.”
This is a rare opportunity for bipartisan cooperation that should be taken.
Senators Schumer and Gillibrand have already signed on to legislation sponsored by Senator Sherrod Brown (D-OH) addressing EITC expansion. This bill (S. 1012) would both expand the EITC to low-wage workers not raising children between the ages of 21-24, as well as make the EITC more adequate for all low-income workers not raising children. This proposal would improve the lives of roughly 1.1 million low-wage, childless workers in New York State, including the 466,000 currently taxed into poverty, 27,000 current and former members of the military, 282,000 young workers, 309,000 Latino workers, 183,000 African-American workers, 113,000 Asian workers and 60,000 workers in rural areas.
The bottom line is that no working American should be taxed into – or deeper into - poverty. Fortunately, there may be an opportunity to address this issue early in 2017. President Trump and Republican leaders in Congress are reportedly planning to pursue tax reform, which would likely include significant tax breaks for corporations and high-income taxpayers. Low wage workers spoke loud and clear during the presidential election, wanting Congress and the next administration to address their concerns. Lawmakers have a responsibility to ensure that struggling workers—such as those who are currently excluded from the EITC—also receive tax relief, should a tax package be presented.
Ron Deutsch, Executive Director, Fiscal Policy Institute
Reg Foster, President & CEO, United Way of New York State