Augusta, MAINE – This year, policymakers in Augusta can help working families meet their basic needs by expanding Maine’s Earned Income Tax Credit (EITC), a state version of the successful federal tax credit.
State EITCs — which are on the books in 29 states plus the District of Columbia and Puerto Rico — build on the success of the federal credit by reducing hardship for working families and children and boosting the nation’s future economic prospects, according to a new report from the Center on Budget and Policy Priorities.
“State lawmakers have a real opportunity this year to improve the lives of working families across Maine,” said Sarah Austin, a policy analyst at the Maine Center for Economic Policy. “Our EITC already does a lot to help our families and kids. A stronger, expanded credit could do even more and put our state on the path toward a brighter economic future.”
This year, lawmakers in Maine will consider several proposals to strengthen Maine’s EITC, which is currently among the smallest state-level credits in the nation. Those opportunities include increasing the size of the credit to up to 30 percent of the federal EITC, expanding eligibility to working 18- to 24-year-olds without children, and providing the credit to people who work but don’t receive a paycheck, such as low-income students and caregivers.
State EITCs provide extensive benefits to children, families, and communities, and are straightforward to administer and to claim. They also help rebalance upside-down state tax codes, in which low- and moderate-income families pay higher state and local taxes as a share of their income than do upper-income families. In Maine, the top 1 percent of families pay less in state local taxes as a share of their income than any other income group, according to the Institute on Taxation and Economic Policy.
By expanding Maine’s EITC, policymakers would be building on recent progress made by several states. Puerto Rico’s new local EITC was signed into law in December 2018. Louisiana, Massachusetts, New Jersey, and Vermont all increased the size of their credits to bolster the wages of working families, while California and Maryland expanded access to the credit for people who were previously ineligible.
Because state lawmakers have moved to support working families through state EITCs, almost half of recipients of the federal EITC are also eligible for a state credit, and state EITCs boost the earnings of working families by nearly $5 billion annually.
“The EITC helps the many working families with children who struggle to make ends meet on low wages, and it ensures that women and communities of color — two groups that disproportionately work in low-wage jobs — see the fruits of their labor and share more fully in economic growth,” said Samantha Waxman, Policy Analyst at the Center on Budget and Policy Priorities. “State lawmakers can build on the proven effectiveness of the federal EITC by expanding their state-level credits to help families keep working and reduce poverty, especially among children.