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An Act
Improving the Earned Income Credit for Working Families -- H.2336
Clarice B. Gordon,
LWVM Meeting Basic Human Needs Specialist
Urge your legislators to support H.2336
which would increase the Massachusetts Earned Income Credit (EIC) to 30% of the
federal EIC instead of the current 15% credit and promote participation of
additional eligible workers through workplace education.
Background
The federal government would continue to set requirements and determine the
basic amount of the Earned Income Credit. (Details are in Internal Revenue
Service Publication 596.) This program truly benefits people with very low
incomes, especially those with children. The maximum EIC amount is reached at
income levels of $11,050 for those with two or more children, $7,050 for
one-child families, and $2,450 for individuals. When incomes are higher, the EIC
is the same amount or less. The maximum 2005 Adjusted Gross Income to qualify
for any credit was $37,263 for a married couple with two or more children, down
to $11,750 for an individual with no children. The Massachusetts Budget and
Policy Center estimates that it would cost the state approximately an
incremental $75 million to fund the state portion of the EIC if H.2336 passed,
bringing the total to $150 million.
The state expenditure for the EIC would be
balanced by more than three times as much money coming to poor families from the
federal government and likely spent locally. Additional funds spent may be
recovered by successful outreach to eligible workers who have not benefited in
the past. Three other states now grant at least 30% of the federal EIC (Vermont,
New York and Minnesota). Eighteen states and the District of Columbia have EICs.
Lead Sponsor
Representative Shirley Owens-Hicks
Talking Points
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The Earned Income Credit is the single
most effective antipoverty program in the U.S. and has raised about 5 million
individuals out of poverty nationwide, over half of them children.
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The high cost of living in Massachusetts
supports the EIC increase on behalf of working people who do not make enough
to buy adequate food, clothing, housing and other necessities. For example, it
is estimated that a family needs to make $24 an hour to rent a two-bedroom
apartment in Boston at a current rate of $1200 per month.
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Funds go to families very efficiently
because administrative costs are low. The Earned Income Credit uses the same
mechanisms as payroll tax collection already in effect for people of all
income levels.
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The EIC encourages work with its
advantages to society of bringing people into the mainstream of public life
and providing opportunities for new skills and advancement.
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The EIC provides an economic stimulus
where participants live, since the extra income is usually spent quickly and
the federal dollars transferred far exceed the state contribution.
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Estimates are that about 70,000 eligible
workers in Massachusetts (20% of the workforce) have not applied for the EIC.
Outreach is needed because of low educational levels and lack of English
mastery among low-wage workers.
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The EIC helps mitigate the regressive
nature of the flat Massachusetts income tax.
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The additional income provided by the EIC
is modest, but extremely important to those at the bottom earnings level. For
example, someone working full time at the minimum wage makes about $14,000 per
year in Massachusetts. The federal EIC currently adds $2662 to the family’s
annual income if there is one qualifying child and $4400 for two or more
children. The state EIC adds $400 more for one child and $660 for two or more
children. H.2336 would double the current state EIC.
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