New push for higher tax credit for working poor: How NJ residents could benefit
Advocates for the earned income tax credit as an anti-poverty tool have a new goal for next year: Getting Congress to boost benefits for working adults without children.
A new campaign seeks to change the tax credit in two ways – by doubling or tripling the benefit for childless workers and expanding it to young adults starting at age 21.
In New Jersey, such changes could benefit anywhere from 343,000 to 504,000 workers, depending on which of three plans kicking around Congress gets traction.
But it could also come at a cost to the state budget. New Jersey’s credit is 35 percent of the federal credit – so if it goes up, or goes to more people, New Jersey’s $430 million EITC program would grow along with it. An estimate of the cost wasn’t available Tuesday.
“I think the earned income tax credit, along with many other things that we are trying to do in the state of New Jersey, is a key focal point,” said Assembly Speaker Vincent Prieto, D-Hudson. “New Jersey is a great state to live in, but it’s also a very expensive state to live in. So many people are in poverty.”
At Prieto’s urging, the earned income tax credit was increased as part of the tax-cuts bargain struck along with a hike in the gas tax to pay for the Transportation Trust Fund.
New Jersey could particularly benefit from lowering the age at which people can start receiving the earned income tax credit from 25 years old to 21, said Renee Koubiadis, executive director of the Anti-Poverty Network of New Jersey.
Nearly half of 18- to 34-year-olds in New Jersey live with their parents, highest in the nation.
“They cannot afford to move out on their own right now,” Koubiadis said. “Lowering the eligibility age to 21 would enable more people to enter the workforce and to more fully participate in our state’s economy. Research shows that people spend their tax credits immediately and in the community, boosting the state’s economy.”
An estimated 101,000 to 122,000 young adults would become eligible if the age cutoff was lowered.
“If you think 22-year-olds don’t need an extra boost when they’re working a low-income job, that’s not fair,” said Ann Vardeman, program director for New Jersey Citizen Action.
Benefits under the earned income tax credit program vary by family structure.
Married filers with three or more children are eligible for federal credits as large as $6,269 if their incomes are below $53,505; the cutoff is $47,955 for single filers. Credits are smaller and income eligibility levels are lower for filers with fewer children.
Workers without children can receive a maximum federal credit of $506, if their incomes are below $20,430 for married filers and $14,880 for single filers. On top of that, they could receive $177 as a state credit this year.
Under proposals currently pending in Washington, the credits for workers without children would increase by close to $500, $900 or $1,000. That would mean increases in their state credits of $173, $313 or $348, depending on which of any of the existing proposals were to be adopted.
The most expansive of those plans is sponsored in part by U.S. Sen. Cory Booker, D-N.J.
In 2014, almost 553,000 taxpayers claimed a New Jersey earned income tax credit.
Just over half of states have an earned income tax credit. At 35 percent in 2016, the only places that provide higher credits are California and Washington, D.C.
The prospects for changes in Washington to the earned income tax credit depends on the outcome of this year’s election for president and Congress.
Democratic presidential nominee Hillary Clinton has endorsed the expansion of the earned income tax credit for workers without children, said Jon Whiten, vice president of New Jersey Policy Perspective.
“It is not specific about which of the three competing federal proposals she thinks is best, so it’s sort of a framework kind of thing,” Whiten said. “But she’s clearly in favor of it, and it’s our hope that depending on how the presidential election plays out that she and the members of Congress make it a priority.”
Republican presidential nominee Donald Trump has called for expanding the earned income tax credit specifically for low-income workers with children, to act as a rebate for childcare expenses. The benefit could equal as much as half of the payroll taxes a worker pay for married filers earning up to $62,400.