TURNER/WHELAN BILL TO FULLY RESTORE EARNED INCOME TAX CREDIT RECEIVES FINAL LEGISLATIVE APPROVAL
Measure Would Increase EITC to 2010 Levels, Provide Needed Tax Relief to State’s Working Poor
TRENTON – Legislation sponsored by Senators Shirley K. Turner and Jim Whelan that would strengthen a proven anti-poverty measure and put money back into the pockets of New Jersey’s working poor was approved today by the General Assembly, receiving final legislative approval. The bill now heads to the Governor’s desk.
“When the Governor reduced the Earned Income Tax Credit, our working poor families lost income that helps to sustain their severely strained household budgets,” said Senator Turner (D-Mercer/Hunterdon). “Working poor families use these funds to buy basic necessities for themselves and their children, and every dollar they receive from the credit is pumped back into our economy. Restoring the funding makes good economic sense, giving a hand up where it’s needed and providing a financial boost for our local economy.”
The bill, S-2535, would restore the Earned Income Tax Credit (EITC) level to 25 percent of the federal credit amount. Governor Christie reduced the credit to 20 percent in his FY2011 budget, but last week, as part of his conditional veto of the minimum wage, proposed increasing the EITC back to the limits prior to his cuts. This measure would provide that increase one year ahead of the Governor’s proposed restoration. Senators Turner and Whelan note that an increase in the EITC should not be tied to accepting a minimum wage deal that does not provide real relief to New Jersey’s working families.
Additionally, the Senators note that last year, Governor Christie attempted to tie an increase in the EITC to accepting his across the board income tax cut – a measure that would have disproportionally benefitted the wealthy over New Jersey’s middle and working classes. The Legislature approved a bill that would restore the EITC levels to 25 percent last June. The measure was absolute vetoed by the Governor.
“Not only does the Earned Income Tax Credit provide much-needed assistance to working families, but it also serves as a tool to spur economic growth throughout the state. The EITC provides low- and middle-income families with a little extra money in their pockets that they will put back into the local economy,” said Senator Whelan (D-Atlantic). “This program is a win-win as it helps working families who in turn will help small businesses.”
The earned income tax credit is a refundable federal credit program that lessens the burden of payroll taxes such as Social Security and Medicare that disproportionately affect lower income workers. The federal EITC lifted 6.6 million Americans – including 3.3 million children – out of poverty in 2010. In 2012, more than half a million New Jerseyans benefited from the program, which – according to the Washington, DC-based Center for Budget and Policy Priorities – is the nation’s most effective antipoverty program for working families.
Since the program’s enactment in 1975, 25 states plus the District of Columbia supplement the program with their own state-based EITC program. In New Jersey, the credit is calculated as a percentage of the federal EITC, which is adjusted yearly based on inflation. Credit amounts are distributed based on income and family size. For example, a single parent with two children would have had to make less than $41,952 in 2012 to be eligible for the credit. In 2008, 87 percent of those receiving the EITC made less than $30,000.
According to the Center for Budget and Policy Priorities, there is extensive evidence that the EITC encourages individuals to obtain jobs and remain employed. Supporters of New Jersey’s EITC attribute the program to a significant increase in labor force participation among New Jersey workers and a method of supplementing the incomes of low-income working families, stabilizing the economic outlook as they move up the career ladder and better ensuring they remain independent from public assistance. President Ronald Reagan called the program “the best anti-poverty, the best pro-family, and the best job-creation measure to come out of Congress.”
The bill was approved in the Senate last week with a vote of 27-1 and in the General Assembly today with a vote of 46-24-5.