For Tax Day I had a story over at the Yankee Institute about the Earned Income Tax Credit:
The EITC supplements the wages of low-income workers by sending them a check after they file their tax returns — even when they have no income-tax liability. The underlying idea is to refund the payroll taxes of low earners.
Who qualifies and how much they receive is based on what they earn and how many children they have. In Connecticut, for example, a married couple with two children making less than $51,492 would qualify. That family would receive at most $5,716 from the feds plus another $1,315 from the state. This would boost their total income to about $58,520, which is more than 227 percent of the federal poverty level.
Three different bills introduced in the Assembly sought to either expand the state EITC, kill it, or modify it, but all of them died in committee. I’ve become something of an evangelical for the EITC since learning about it last year, and it’s my hope the article, if nothing else, raises the program’s profile.
When I moved to Connecticut in 1995, I earned $21,000 a year, equivalent to about $35,000 today. I often think about how difficult it would be to live on that amount now, in part because of the increased tax burden. Back then, Connecticut only had income-tax brackets for the highest earners, but today anyone making $1 or more has some liability. I can’t imagine squeaking by on $35,000 and yet having to pay income tax on it.
At 3 percent for the lowest bracket, I’d be paying $1,050 to the state, which is very nearly the median monthly rent in Connecticut.
It’s incredible how low earners in this state are screwed, particularly by taxes. The issue of raising the minimum wage receives a lot of airtime, even though less than 1 percent of the American population earns the federal minimum wage or less (caveat: the fed’s minimum wage is very low — $7.25 an hour). In the article I cite Pew Research, noting that 3.3 million Americans earn the federal minimum wage or less, but that number is from 2013. According to the Bureau of Labor Statistics, the total decreased to 1.8 million by 2017.
In contrast, 25 million received a refund via the federal EITC in 2018 — nearly 14 times the number of people earning the federal minimum wage or less. Many more people are impacted by the EITC than would be affected by raising the minimum wage. Don’t forget that raising the minimum wage also results in layoffs.
When you hear cries from certain quarters saying we need to raise taxes, what they really mean is the income tax (and maybe capital gains taxes too) because that’s our only progressive tax — that is, the more you make, the higher percentage you pay.
What they ignore — or maybe don’t want to admit — is that *everybody* pays taxes, including low earners. Low earners pay sales tax. Low earners pay property taxes through their rent or mortgage, and in Connecticut on their cars too. Low earners pay tariffs. Low earners pay payroll taxes. Demands for more taxes means just that: more taxes for everyone, not just for the reviled rich.
This is one of the few times you’ll ever see me boosting an entitlement program but if we’re going to have a system that uses tax money to fill the potholes (just kidding — most of our taxes go to pay interest on debt and to bomb people in other countries), then it shouldn’t be done on the backs of those living closest to the edge. The EITC is something we should keep in Connecticut.