As I write this column on Tax Day, or April 15, we mostly likely will have about one month left before lawmakers adjourn the 2019 legislative session. I want to take the time to reflect on one of the major tax policy discussions being held at the Capitol: The Earned Income Tax Credit (EITC).
As the Center on Budget and Policy Priorities (CBPP) defines it, the EITC is defined as “a federal tax credit for low- and moderate-income working people. It encourages and rewards work as well as offsets federal payroll and income taxes. Twenty-nine states, plus the District of Columbia, have established their own EITCs to supplement the federal credit.”
Up until 2016, Oklahoma not only issued its own EITC, it was “refundable,” meaning a taxpayer could claim a tax credit even if it exceeded his or her tax liability. Around 348,000 Oklahoma households received the EITC. While all of these households benefited, the EITC helped to lift 121,000 Oklahomans out of poverty, including 69,000 children
Unfortunately, in 2016, the refundability of the EITC was eliminated in Oklahoma to help address the state’s budget woes. Numbers provided by the Oklahoma Policy Institute show that this policy change resulted in more than 200,000 Oklahoma families losing some, or all, of the value of their EITC. Statewide, low and middle-income working families lost nearly $28 million due to the cut. That’s an average of $121 per family, and many low-wage families lost even more.
- A married couple with two children earning poverty-level wages ($24,600) lost $264;
- A single parent with two children making $10 an hour lost $231 dollars;
- A single parent with one child making minimum wage ($7.25 an hour) lost $169.
This lost income directly impacts vulnerable children. CBPP research has shown that children in families who get an income boost from the EITC (as well as other policies like the Child Tax Credit) quickly show improvements in health and school performance relative to other low-income children who did not receive this extra help. In addition, children whose families receive that boost have higher school test scores, on average, and are more likely to go to college and to work and earn more as adults.
Many of the Oklahoma families that are eligible for the EITC have such low incomes that they owe very little in income tax. Such a boost from even a small portion qualifying for refundability could pay for some utilities, groceries, prescribed medicines or a myriad of other necessary expenses that far too many Oklahomans must juggle on a month-to-month basis. It is also important to note that the EITC subsidizes and supports only employed, working Oklahomans. For those who argue that we need to reward hard work, the EITC clearly does that.
To see how it could impact your home county, go to https://oksays.com/eitc/#county-impact to review the numbers. Please also contact your lawmakers to encourage this incentive which could move many Oklahomans out of poverty status and off state welfare programs.