At the start of tax season, on Earned Income Tax Credit (EITC) Awareness Day, I joined with advocates to encourage 251,000 hardworking Utahns to claim the federal EITC. The EITC allows low-income working families to keep more of their wages and afford basic necessities for their families.
Also on that day, I introduced legislation designed to address intergenerational poverty among working Utahns by establishing a policy with proven results. The legislation, HB 218 Working Individuals and Families Credit, provides further assistance to low- and moderate-income taxpayers who are working but struggling to make ends meet. It does so by cutting state taxes and bolstering the impact of the federal EITC.
In 2012, nearly 1 in 5 Utah taxpayers received the federal EITC. The effectiveness of the federal tax credit is well documented. It provides an incentive to work, increases job skills and has kept more than 60,000 Utahns, 33,000 of whom were children, out of poverty. President Ronald Reagan called the EITC a “sweeping victory for fairness” and “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”
The Working Individuals and Families Credit is modeled after and linked to the federal EITC. Since 1976, the federal EITC has provided working families with the boost they so badly need when hours are cut and incomes erode. The Working Individuals and Families Credit is a Utah investment, particularly in the working poor, not through a government handout but with a ladder up to help working families climb their way out of poverty. Among those helped would be our military families, including our returning veterans, who could use the Utah tax credit to supplement their wages as they make their way back into the civilian workforce.
The Working Individuals and Families Credit would provide a Utah tax credit to those taxpayers who receive the federal EITC. Although substantially smaller than the federal EITC, many low-income workers who are only an illness, a layoff or perhaps a car repair away from financial devastation would be aided by even this small bonus.
Not only will the Working Individuals and Families Credit invest directly in workers, but it will invest in their children and our local economies. Today, nearly 1 in 6 Utah children lives in poverty — and nearly half of those children are living in intergenerational poverty. However, outcomes for children living in families receiving the federal EITC, and thereby the state tax credit, experience improved health and academic outcomes and greater lifetime earnings, decreasing the risk of a lifetime of poverty.
The Working Individuals and Families Credit does require an investment by the state but will generate economic activity in communities throughout our state. By reducing the taxes for these low-income workers, they will have additional resources to meet the basic needs of their families. As is the case with the federal tax credits, the state credits will be largely spent in our small businesses, helping those businesses continue to recover from the Great Recession.
The Working Individuals and Families Credit is a win-win for Utah. It is time to make this modest investment in our low-income workers, who continue to play a valuable role in Utah’s re-energized economy.
Rep. Eric Hutchings is a member of the Utah House of Representatives for District 38.