MEASURE TO REDUCE POVERTY FOR WORKING MAINERS BROADLY SUPPORTED

Earned Income Tax Credit “recognizes the value of Mainers going to work”

AUGUSTA – A measure seeking to increase the Earned Income Tax Credit (EITC) benefit for working Mainers received strong support during a public hearing in the state’s Taxation Committee today.

Sen. Nate Libby of Lewiston

“The EITC recognizes the value of Mainers going to work every day,” said Democratic State Senator Nate Libby of Lewiston, the sponsor of the measure. “Other tax policy initiatives, like a reduction in the capital gains tax, recognize the value of Mainers who passively collect income from investments. On the whole, which group tends to struggle to make household budgets each month? Which group could better use a hand-up?”

The measure, LD 648, “An Act To Increase the Earned Income Tax Credit for Maine Residents,”

would increase the percentage of the federal EITC that can be claimed on the Maine state income tax from 5% to 20% and would limit the eligibility of this benefit to full-time Maine residents.

During the public hearing, Eloise Vitelli, Director of Program and Policy for Women, Work, and Community noted that the EITC is a “proven strategy to move people off of assistance.” Ms. Vitelli added that the EITC “puts much needed cash back into [low income tax filers] pockets and that cash is spent in our communities. Further, it allows families to get caught up on paying bills or make long over-due purchases. It can help a family from falling further behind or provide a critical cushion for hard times and it can give a family some breathing room they need to get ahead.”

The federal EITC has been in effect for 40 years and has historically received broad bi-partisan support as an effective anti-poverty, work incentive program. Maine is one of 26 states to have an EITC.

According to a recent analysis of Maine’s EITC program by the Maine Center for Economic Policy (MECEP), 20,000 Maine families received an average state credit of only $55 in 2013. The study illustrates the positive impact of raising Maine’s EITC to 20% of the federal credit and making it refundable, for low-income families with children who earn less than $40,000 per year:

• After-tax income for a married couple raising two kids and earning a combined annual income of $25,000 per year would rise by nearly $1,000. That same family receives zero benefit from Maine’s current EITC, because it is not refundable.
• A single working parent raising one child and earning $20,000 per year—$10 per hour, would receive a refundable credit of $570. That same worker currently receives zero benefit from Maine’s non-refundable EITC.

Additionally, families living in rural Maine would benefit most since a disproportionate number of low-wage jobs are located there. In Washington County, 25% or 3,174 people would be eligible to claim this enhanced EITC.

Sen. Libby added, “This credit has enormous value in helping working Mainers support themselves and their families.”

The Taxation Committee will hold a work session in the coming weeks.

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