(Photo via the Governor's Office)
As President Trump pushes massive tax cuts for the wealthy our state government should be at the forefront of implementing progressive tax policy to help working families. Expanding the state Earned Income Tax Credit (EITC) is an effective and affordable way to reward work and bring low-income families into the middle class. If Governor Cuomo wants to show that New York can be a progressive beacon in the Trump era, he should push to double the size of the state EITC.
A working parent earning the minimum wage in the Bronx or Schenectady got a much-deserved raise this year and will again next January as a result of increases in the state minimum wage. At the same time that they earn more, however, they pay more in taxes and risk losing valuable benefits such as child care assistance, food stamps, and rental assistance. The EITC helps make up for these losses if they occur.
The EITC is a credit that increases tax refunds and goes up as recipients earn more. For example, this year a single parent with one child earning $17,000 will get a $3,400 federal credit that they can put towards child-care, rent, food, and paying down debt.
Currently, the state-level credit pays 30% of the federal EITC. In 2014, on average families with one child received $666 from the state EITC and families with two kids $1064.
Economists have shown that the EITC leads to both increased employment and decreased poverty by helping over 9 million Americans meet their basic needs. The EITC helps working families join the middle-class, allowing them to pay down debt and build assets. Unlike many economic development projects, which can be ineffective and politicized, the EITC puts cash into the hands of working people in the communities that need consumer spending, economic growth, and jobs.
Policymakers and analysts left, right, and center have supported expanding the EITC. The federal program began under Republican President Gerald Ford and was significantly expanded under President Bill Clinton. In the State Assembly, Democratic Speaker Carl Heastie and the GOP minority leader, Brian Kolb, have both advocated for increasing the credit.
Expanding the EITC will also help make up for New York’s regressive tax system, which burdens the working people more than the wealthy. The Fiscal Policy Institute found that New Yorkers making under $18,000 a year pay 10% of their income in state and local taxes, while families in the top 1% only pay 8% of their income in taxes. An expanded EITC will give back some of the property, sales, and income taxes that working families pay.
Moreover, the federal EITC does not take into account the New York’s high cost of living, which is 15.7% above the national average. An expanded EITC will help alleviate the additional burden that high prices put on low-income New Yorkers.
Doubling the EITC to 60% of the federal credit would be a small portion of the state’s $153 billion budget this year. In 2014 the cost of the EITC was under $1.1 billion and helped over 1.6 million working New Yorkers. Governor Cuomo could easily pay for expanding the EITC by limiting tax deductions and exclusions for high-income individuals and cutting corporate subsidies.
New York’s working families deserve a raise and an opportunity to enter the middle class. Doubling the state EITC is the perfect way to give them a hand up.
Devin Gould is a graduate student in public policy at Princeton University’s Woodrow Wilson School of Public and International Affairs. He previously worked at the NYC Economic Development Corporation and was President of the Four Freedoms Democratic Club in Manhattan.