SB 398: EITC Eligibility on Pay Stubs

March 8, 2017 Download PDF

Testimony of Daniel Hauser

The Oregon Center for Public Policy (OCPP) supports Senate Bill 398 and its effort to increase the use of the Earned Income Tax Credit (EITC) among eligible working families in Oregon. We have a couple of suggestions for improving the bill, as well.

The EITC helps hundreds of thousands of low-income families in Oregon lift themselves out of poverty and toward self-sufficiency. Research shows children in families receiving the EITC are healthier, perform better in school, and have higher earnings as adults.

Unfortunately, Oregon consistently has one of the lowest EITC participation rates when compared to other states. Internal Revenue Service (IRS) data indicates Oregon had the 3rd worst rate in 2013, with only Colorado and the District of Columbia below our 74 percent participation rate (in 2012, Oregon was dead last in the nation). This means one in four working Oregonians who are eligible for this significant tax subsidy are not claiming it.

One might ask: why? First and foremost, many taxpayers are unaware they are even eligible for the benefit. SB 398 helps address this problem.

This poor participation adds up to real money. OCPP estimates that Oregon workers eligible for the EITC, but not claiming it, left $130 million on the table in 2013.

Our state can and should do more to promote the EITC and ensure more Oregonians are benefitting from this important work subsidy. SB 398 takes an important first step in increasing the use of the EITC by helping working Oregonians see their eligibility clearly and consistently on their paystubs, and provides a path toward learning more about this benefit.

We would recommend two improvements to the bill. First, the notice and promotion of awareness should emphasize eligibility for both the state and the federal EITC, not just the federal.

Second, the requirement for three state agencies to promulgate rules to increase awareness of the EITC should be stronger. These agencies should not just work together on rules; they should be directed to actively encourage more use of the EITC by working families in Oregon in ways other than adding information to paystubs and posters that employers must display. Regrettably, there’s no state agency responsible for boosting Oregonians’ use of the EITC. SB 398 takes an important first step and is an opportunity to get these agencies, and others, working to improve Oregon’s participation rate.

By boosting federal EITC participation, lawmakers would be drawing millions in federal dollars into the Oregon economy. The working families who get the EITC tend to spend their dollars, and spend them locally, not save or invest out of state.

Thank you for considering this important piece of legislation, and we encourage your support of SB 398 with the suggested changes.

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