Last year, the General Assembly and the governor took an important first step to help thousands of working families make ends meet by increasing the state’s Earned Income Tax Credit (EITC) — a tax benefit for workers earning $50,000 or less — to 12.5 percent of the federal credit.
As the Ocean State strives to become a place where all families can enjoy our natural beauty while maintaining affordable housing, nutritious food, and a quality education, a further increase to the state’s Earned Income Tax Credit is a common-sense tax policy we should all rally behind. An increased state EITC means 83,000 Rhode Island taxpayers are rewarded for working hard to keep their families afloat.
That is why, for the second consecutive year, we have introduced legislation in the House and Senate to further increase the state EITC to 20 percent of the federal credit. With our legislation, a family qualifying for the maximum EITC will receive a tax credit worth up to $1,248—a significant amount for our struggling working families.
Massachusetts and Connecticut have adopted the refundable state EITC as smart policy to support working families, with refundable credits of 23 percent and 27.5 percent, respectively.
The paychecks of too many Rhode Island workers have fallen behind and our current tax structure does not provide adequate relief. Of the 50 occupations expected to produce the most job openings by 2022, nearly one in four jobs will pay less than $11 an hour, the amount the Economic Progress Institute (EPI) finds a single adult needs to earn to meet his or her most basic needs and less than half of what a single parent of two children requires.
We all benefit from living in a state where hard work is rewarded. An increased EITC helps our workforce but it also helps our local economies. More money in the pockets of working Rhode Islanders means more money in the cash registers of supermarkets, retailers, and other local businesses. The return on investment is large. The Economic Progress Institute estimates that increasing the EITC to 20 percent would not only put $12 million in pockets of working families, but add approximately $15 million to the economy through the multiplier effect. Raising the EITC to 15 percent, as proposed by the governor, would put $4 million in the pockets of working families, and add around $5 million to the economy through the multiplier effect.
With last year’s EITC increase, the General Assembly and the governor took an important step to reduce income inequality in the Ocean State and reward our workers who are doing their best to make it in Rhode Island.
We strongly believe that if you are working, you should not be poor. Raising the minimum wage and expanding EITC is helping those who work for lower wages to get ahead. The very least we can do is increase a common-sense tax credit that helps our hardest workers make ends meet. If we do not, it saps the belief that our state is a place where hard work and persistence can lead to a better life. A state EITC increased to 20 percent of the federal credit is the smartest investment we can make. We can all profit from living in a state where hard work is rewarded, taxes are fairer, and our local businesses thrive.