Let’s talk taxes: EITC and fighting intergenerational poverty

August 3rd, 2018|Issue Update|0 Comments

Lifting Utah’s Working Poor: The Earned Income Tax Credit 

For the last 5 years, Utah legislators, nonprofits, community members and others have advocated for a Utah state Earned Income Tax Credit (EITC). Utahns already benefit from the federal EITC, which is aimed at low-income individuals and families who are part of the working poor. This tax credit is refundable, meaning not only can it reduce or zero out a household’s taxes, but it can also be used towards a refund check. A state EITC would enhance the federal EITC by adding 10% to the federal EITC amount to help low-income, working families rise out of poverty.

HB 57: Utah’s IGP EITC bill

During the 2018 Utah General Session, Rep. Westwood (R-Cedar City) proposed a state EITC that would directly target working families in intergenerational poverty (IGP) —  meaning families who have experienced at least two generations of poverty. This narrowly defined bill means EITC won’t benefit all low-income families like the federal policy, but it will impact some of the most vulnerable working families and will cost less. Estimates show that IGP EITC benefit 39,376 adults and 59,579 kids in Utah.

The good news is that HB 57 passed votes in both legislative houses in 2018! The bad news is that no funding was allotted for the bill, causing it to ultimately fail.

2018 Special Session Updates

During the July Special Session, legislators had the opportunity to set aside for IGP EITC a new stream of funding from a federal tax change in how businesses handle net operating loss (NOL). However, Governor Herbert refused to allow the funds to be attached to the EITC proposal, and legislators voted to apply the funds toward a Child Tax Credit instead. However, legislators still have the ability to appropriate the $6 million needed to cover IGP EITC during the 2019 State Legislative Session if the IGP EITC bill passes once again.

Benefits of EITC

Decades of data shows that the EITC brings households out of poverty, rewards work and helps families become more self-sufficient.

  • Children of families who receive the ETIC are more likely to do better in school, to go to college, and to earn more as adults.
  • In the 1990’s women enjoyed a boost in employment and wages paralleling with the boost of use of the EITC.
  • During the 90’s there were even public health improvements tied to the EITC, including less low weight births and premature births.
  • The EITC is also linked to better preparation of students. In the early 2000’s a Federal EITC at the level of $3,000 boosted achievement for students equivalent to 2 months of extra schooling.
  • The federal EITC has already been critical to strengthening our economy and benefiting Utahns:
    • In Utah, 218,500 workers and 291,000 kids have taken part in the federal EITC.
    • The EITC brought about $471 million into Utah’s economy in 2014.
    • Thousands of veterans and military families are using the EITC.
    • Because of EITC, 67,000 Utahns avoided falling into poverty in 2014, including 35,000 children.
  • Federally, the EITC has been shown to lift 9.4 million impoverished people out of poverty in a single year – most of which are children.

The State EITC would cost $6 million dollars and provide on average $240 and a maximum of $600 per family.

What happens next?

Stay tuned for information from Action Utah on the IGP EITC proposal throughout the remainder of Interim Session and as it advances into the 2019 State Legislative Session in January.

Want to take action now?

  • Email your state legislators (senator and representative) and ask them to support funding for the IGP EITC proposal (2018’s HB 57: Intergenerational Poverty Work and Self-Sufficiency Tax Credit). Don’t forget to mention that you are a CONSTITUENT! Find out who represents you here.
  • Write a letter to the editor of your local paper to call on more constituents to contact their state rep and senator as well, or to call on the legislator to make it their moral imperative to fund the IGP EITC at last.

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