Helping the working poor Earned income tax credit: Make state tax partly refundable to poorest wage-earners.

March 06, 1998

WELFARE REFORM has swollen the job force with low-wage employees who, even if employed full time, are often referred to as the "working poor." The ready supply of such people has depressed wages for waiters, janitors, maids, retail clerks and others. They are learning that in this service-oriented economy, a job no longer guarantees a decent life.

Yet the movement of people into the work force is a good thing. Morally, it is right to take responsibility for oneself. Besides, public assistance does not provide enough for families to escape poverty and dependency. The cultivation of skills and work experience gives individuals a chance for advancement.

Nearly one-quarter of Maryland's poor families with children -- whose incomes are below the federal poverty line of $16,000 -- include a full-time worker. Low-wage earners have been losing ground, despite an economic boom. We must make sure that the neediest members of society do not become desperate or lose the incentive to continue working.

That is why we support legislation in the General Assembly to give Maryland's poorest working families a few hundred extra dollars each year by making a portion of the state's earned income tax credit (EITC) refundable.

A refundable credit means that even if you owe no taxes, you can get some of the credit refunded to you. The federal EITC is 100 percent refundable. This bill would allow poor workers a similar refund in state taxes, only at a much lower rate, perhaps 15 percent or 20 percent.

This would cost the state about $30 million a year. Some lawmakers are rightfully wary of committing to such a continuing cost. But society also has an interest in giving the working poor a small boost. This proposal would allow Maryland to do so without raising the minimum wage, a move often criticized as harming the state's business image.

We ought to encourage people to work and provide incentives for them to advance. A partly refundable EITC would help.

Pub Date: 3/06/98

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