As Oregon lawmakers consider increasing the state’s Earned Income Tax Credit (EITC), a new national report examines how state EITCs reduce economic hardship for working families and children, while boosting the nation’s future economic prospects.
A bi-partisan group of lawmakers is sponsoring House Bill 3028, legislation that would renew and increase Oregon’s EITC, a tax credit designed to help working families earning low wages.
“Despite working hard to support their families, many Oregon workers don’t earn enough to pay for the basics,” said Janet Bauer, policy analyst at the Oregon Center for Public Policy. “The EITC is one of the most effective anti-poverty tools; increasing it will make it work better for working families.”
Raising the state EITC would increase the economic resources available to some 900,000 modest-income Oregonians, a group that includes four out of 10 children in the state, said Bauer.
The Oregon EITC dates back to 1997, when the legislature created it with bipartisan support. The Oregon tax credit is a smaller version of the federal EITC — those who qualify for the federal tax credit can claim the Oregon one as well. Among the 29 states that offer their own EITC, Oregon’s tax credit is one of the smallest.
House Bill 3028 would increase the Oregon EITC from 8 percent of the federal credit to 20 percent. Families with children under age three, who currently qualify for a bigger state tax credit, would see their Oregon EITC go up from 11 percent to 25 percent of the federal EITC.
State EITCs provide extensive benefits to children, families, and communities, and are straightforward to administer and to claim, explains a new report by the Washington, D.C.-based Center on Budget and Policy Priorities (CBPP). These state tax credits also help rebalance upside-down state tax codes, in which low- and moderate-income families pay higher state and local taxes as a share of their income than do upper-income families. In Oregon, the poorest families pay 10.1 percent of their income to state and local taxes, while the wealthiest 1 percent of families pay 8.1 percent, according to the Institute on Taxation and Economic Policy.
“The EITC helps the many working families with children who struggle to make ends meet on low wages, and it ensures that women and communities of color — two groups that disproportionately work in low-wage jobs — see the fruits of their labor and share more fully in economic growth,” said CBPP policy analyst Samantha Waxman. “State lawmakers can build on the proven effectiveness of the federal EITC by expanding their state-level credits to help families keep working and reduce poverty, especially among children.”