We may see this year, among other surprises from Washington, the first effort in many years to make significant revisions to the tax code. In the last presidential election, all sides expressed concern for the conditions of working Americans who are facing retreating opportunities and wages. We hope for a resurgent economy, but for now, revamping the tax code offers an opportunity to actually help New Yorkers in a way that may attract bipartisan support: tax credits.
Programs like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) serve working people. You have to have income to claim them. Work is still a positive value whether you are in a red or blue state. Both of these tax credit programs could be strengthened as part of a tax code review.
Both political parties can see that struggling workers face real challenges. The need in our state is great. According to United Way’s recent Asset Limited, Income Constrained, Employed (ALICE) Report, 44 percent of New York State households struggled to afford basic necessities. That 44 percent is made up of the 15 percent of people who are below the federal poverty level and includes a jolting 29 percent who work but whose wages leave them below a basic survival threshold.
ALICE is the population that benefits from the EITC. They are the people who work at the increasing number of low paying but essential jobs in our economy. Each day ALICE stands at cash registers, fixes our cars, serves us in restaurants and retail stores, and cares for our children and our elderly. They are hard workers who keep New York’s economy running, but aren’t always sure that they can put food on their own tables.
Unfortunately, the EITC isn’t available to all low wage workers. We should change that. Today, eligibility for the EITC requires that a person be raising a child in their home. This leaves out working, non-custodial parents who are contributing to the support of their children. It leaves out older parents helping children who no longer live with them. And it leaves out single New Yorkers trying to get a foothold in the economy.
In fact, workers aged 21 to 24, who often occupy the lower rungs of the workforce, are completely ineligible for the EITC. That leaves many young, low-wage New York workers struggling to pay their bills, build financial stability and take a step up the economic ladder.
Even worse, without the tax credit, about 466,000 workers in our state that are not raising children – and 7.5 million similar workers across the nation – are entering or being plunged deeper into poverty largely because they’re ineligible for the EITC.
Improvements can also be made to the Child Tax Credit to ensure the lowest-income working families, especially those with young children, can access the full amount of the credit. Currently, any single mother with two children earning less than $16,330 does not qualify for the full amount of the CTC. This is largely because the first $3,000 of her earnings is not counted. That should be fixed.
Given that research shows poverty has a detrimental impact on child development and educational success, and that boosting income in the early years is an effective intervention, we believe strengthening the CTC for low-income families with young children should be a top priority for the next Congress, in addition to expanding the EITC for workers not raising children.
Across the state and nation, United Way sees firsthand the power of the EITC and CTC in supporting working families through our efforts providing free and accurate tax assistance and financial education to low- and moderate-income taxpayers. At Volunteer Income Tax Assistance sites across New York, volunteers help tens of thousands of households file their taxes and connect to the credits. That income helps them keep more of their hard-earned wages to pay for the basics like reliable transportation to get to work, housing, and groceries.
We should seize this opportunity to expand the EITC to low-wage workers not raising children at home and to strengthen the CTC for the lowest-income workers. Strengthening the EITC and CTC is a smart investment in our workforce, and in families and communities in New York.
Ron Deutsch is the Executive Director of the Fiscal Policy Institute. He also leads an all volunteer nonprofit (www.thegivingcircle.org) that works to help improve the lives of families in the Capital District, nationally and internationally.
Reg Foster is the President and CEO of United Way of New York State. Previously he was the Global Coordinator for Corporate Responsibility for the IBM Corporation.