State earned income tax credit again proposed for working poor

Lawmakers say they finally may have devised how to create a state earned income tax credit (EITC) for the working poor that the state can afford.

The House Revenue and Taxation heard testimony Thursday — and no public opposition was voiced. But the committee held HB294 temporarily to wait for a formal estimates how much it will cost.

The EITC is designed to encourage people to leave public assistance programs to work. Without it, some people who work at low wages figure they would actually do better financially not to have a job and stay on assistance.

The federal government provides such credits, as do 26 states. They can help people receive tax "refunds" even when they earn so little that they may not owe any income taxes.

A state EITC has been proposed in Utah several times in recent years, but has been rejected either for costing the state too much or not providing significant relief to the poor — essentially for being too big or too small.

Michael Weinstein, fiscal policy director for Voices for Utah Children, who helped present the bill for sponsoring Rep. John Westwood, R-Cedar City, said HB294 now appears to hit a proper balance.

He said past proposals would have cost the state an estimated $25 million a year. He said supporters figure the current version will cost $5 million to $6 million instead.

That is because it would limit the credit just to those now stuck in intergenerational poverty, as determined by the Utah Department of Workforce Services. Weinstein said that is the highest-risk population for continuing poverty, and the toughest to help move out of it.

By targeting the bill, it would be able to offer a tax credit amounting to 10 percent of the federal EITC. Previous proposals were for only 5 percent, or just $120 on average, which critics said wasn't enough to truly help someone get off assistance.

Bill Cosgrove, representing the American Academy of Pediatrics, said the working poor who come out of intergenerational poverty "are always near the cliff. Not only are they working paycheck to paycheck, but dollar to dollar. A small difference makes a big difference for these folks."

Stan Rasmussen, representing the conservative Sutherland Institute, said, "It is both sound economic policy and welfare policy to lower tax barriers that can unwisely eliminate some of the financial and human rewards" that work brings.