Upcoming EITC bill - talking points and materials:
The hearing for the EITC bill is coming up (this Friday, 10.30 am), so we have to get ready. Here are some talking points, data and research to prepare for the hearing, and information to share with your legislators in your calls and e-mails supporting the EITC. Time to take action!
About the bill itself: H.B. 5526
The Finance Committee has raised bill H.B.5626, a proposal that will look into possible changes on Connecticut´s Earned Income Tax Credit (EITC).
H.B. 5626 instructs the Department of Revenue Services to review ways to introduce a graduated schedule that spreads the refunds monthly, instead of a lump sum, and changes monthly payments in a way that a pay increase does not reduce overall income.
What we want to say:
The state EITC is the best antipoverty program in the state. It encourages and rewards working families, helps support children and makes the state tax code more fair for low-income families.
We support this study to introduce changes to the state EITC to make it a stronger and make working families more financially secure.
About the specific bill proposals:
These are good changes that will make the EITC and even more powerful tool to reduce poverty and create opportunity in the state.
a. Monthly payments:
The bill asks the Department of Revenue Service to study if the EITC could be paid monthly instead of a lump sum. This is a idea worth considering, as it might improve the financial security of recipients.
A study on a pilot program in Chicago (read it here) found that 90% of participants preferred monthly payments to a lump sump by the end of the period.
Monthly payment recipients accumulated significant less debt and late fees - 50% less borrowing from family and friends, 45% reduction on payday loan use.
Monthly payment recipients had significantly lowers of financial stress and improved mental health. They were half as likely to report stress on their ability to make ends meet and to show depressive symptoms.
Only 2% of participants received overpayments.
b. Graduate schedule to receive payments:
As currently structured, the EITC is reduced quickly as a household gets closer to the maximum income allowed, producing high marginal tax rates (income limits chart here).
We encourage the legislature to look at possible ways to alleviate this benefit cliff.
About the Connecticut EITC:
The Connecticut State EITC is the best anti-poverty program in the state. More than 190,000 working families received the state EITC in 2014.Their average income was $17,732, with an average credit of $472.
Majority of recipients had the equivalent of a high school education; 52% are white, 18% black and 25% Hispanic.
The Federal Earned Income Tax Credit and Child Tax Credit (which the state EITC is pegged to) lifted 69,000 people out of poverty in 2013, including 35,000 children.
If you need EITC data specific to your town or to a specific legislator´s district, you can get it here:
State EITC data by town
State EITC data by legislative district of Finance Commitee members
Remember that the state EITC is 27.5% of the Federal EITC. If you have specific data asks or questions, or you need a one-pager tailored to your town, e-mail Erica Dean at email@example.com.
About The EITC effectiveness:
The EITC encourages work: EITC expansions between 1984 and 1996 accounted for more than half of the large increase in employment among single mothers during that period.The EITC expansions of the 1990s appear to be the most important single factor in explaining why female family heads increased their employment over 1993-1999.
Improved infant and maternal health: the EITC is strongly correlated to better health indicators, including reduced stress, fewer low-birth weight and premature births. Mothers are more likely to receive prenatal care and smoke less during pregnancy.
The EITC boost school achievement and college attendance rates.
The EITC boosts the income of children once they become adults, increasing social mobility.
Poverty reduction: the EITC lifts more than 9 million people (5 million children) out of poverty nationwide, and increases the income for 22 million (8 million children).
Additional possible areas to study (optional):
"Rainy-Day EITC": a possible way to reform the EITC that would allow recipients to defer a percentage of their EITC for six months, and receive a saving match in the process to encourage asset building.
Evaluate the possibility of extending the EITC to families without dependents.