Watson Coleman, Manzo Bill Expanding Earned Income Tax Credit Program Signed by Governor

WATSON COLEMAN/MANZO BILL EXPANDING EARNED INCOME TAX CREDIT PROGRAM SIGNED BY GOVERNOR

(TRENTON) - Legislation Assembly Majority Leader Bonnie Watson Coleman and Assemblyman Louis Manzo sponsored to make more working poor families eligible for a tax credit worth an average $558, was signed into law today by Governor Jon S. Corzine.

The Watson Coleman/Manzo measure (S-2647/A-5001) eases eligibility requirements for the state's Earned Income Tax Credit (EITC) program, enabling an estimated 292,600 additional workers to take advantage of the tax break.

"Working people living on the economic edges need tax policies that provide a helping hand, not a cold shoulder," said Watson Coleman (D-Mercer).

Under the law and the state budget, $64 million is provided to expand the state EITC eligibility to match the criteria in the federal EITC program.  The new law also fixes other shortcomings in the state program.

The credit, the amount of which is determined by income and family size, is now available for families with up to $39,783 in earnings for a married family with two or more children.  For a single head of household with two or more children, the cutoff is $37,783.

The EITC expansion is the first step in a three-step commitment to low-income workers.

Step two, in 2009, would require raising the benefit level from 20 percent of the federal credit to 22.5 percent.  Step three, in 2010, would involve raising the benefit to 25 percent of the federal standard.

The federal program, created in 1975, allows low-income families to apply a credit against their income tax bills. Only households where someone has a job can qualify for the credit.

Congress approved the federal EITC in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

Previously, New Jersey had the lowest eligibility cutoff among the 20 states that provide an EITC.  New Jersey had been the only state to cut off eligibility below the level set by the federal program - a hard cutoff at $20,000 rather than a gradual decline.

While eligibility limits in the federal program rose with inflation, New Jersey's previous EITC limit remained the same since it was established in 2000. New Jersey's program also did not offer additional breaks to families with children as the federal program does.

"Our program was at a point where it was literally hurting more families than it was helping," said Manzo (D-Hudson).  "The expansion signed into law today puts New Jersey in the top class of states with EITC programs.  It ensures that our EITC works the way it is supposed to work: helping low-income working individuals earn their way out of poverty and into self sufficiency."

The law also was sponsored by Assembly members Louis D. Greenwald (D-Camden), Wilfredo Caraballo (D-Essex), William D. Payne (D-Essex), John J. Burzichelli (D-Gloucester), Joseph Cryan (D-Union), Joan M. Quigley (D-Hudson), Gary S. Schaer (D-Passaic), Alfred E. Steele (D-Passaic), Joseph Vas (D-Middlesex), Douglas H. Fisher (D-Cumberland), and Neil M. Cohen (D-Union).

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