The Louisiana Legislature has a chance this week to help more than 500,000 working families across the state by strengthening the Earned Income Tax Credit (EITC). House Bill 70 by Speaker Pro Tem Walt Leger III would double the state credit to 7 percent of the federal EITC, from the current level of 3.5 percent. Here are some facts about this credit, which is one of the best available tools for lifting hard-working families above the poverty line.
- The Earned Income Tax Credit is for people who work but struggle to meet basic needs because they simply don’t earn enough money. It helps reduce poverty and pumps money into every community in Louisiana. It is a hand up, not a handout for people who work hard yet earn low wages.
- More than 515,000 Louisiana tax filers claimed the state credit in 2012, which put more than $48 million back into communities across the state.
- Only families that work can claim the EITC. The vast majority of people who claim this credit have children. We know that children have a better chance at success if we can lift their families above the poverty line. They have a better chance of graduating from school and becoming productive citizens. In that sense, enhancing the EITC is not just a wage supplement, but an investment in the next generation.
- Families that claim the EITC pay a lot of money in taxes. In Louisiana, even with the EITC, families in the bottom 40 percent pay an average of 10 percent of their pay in state and local taxes – most of that through sales taxes that are third-highest in the country.
- A new study by the Federal Reserve found that Louisiana’s tax structure is one of the most regressive in the country, and actually helps to increase economic inequality. Enhancing the EITC would help reduce this inequality.
- The EITC is good for businesses. Families that receive this credit spend it in the communities where they live, which means the money goes to clothing, food, rent, bills and other necessities provided by local companies.
- The EITC has a history of bipartisan support. Presidents Gerald Ford, George H.W. Bush, Ronald Reagan and Bill Clinton have enhanced this credit, and Senators Marco Rubio and Mike Lee are currently advocating for another increase.