*Portions of information from this post are republished with permission from Missouri Budget Project (MBP), a nonprofit, objective, public policy analysis organization that provides independent research on complex state policy issues and how they impact all Missourians. Learn more on MBP’s website here.*
A prosperous Missouri requires a strong middle class, with the ability for families that work hard to achieve a better future. A state Earned Income Tax Credit (EITC) is one of the best ways Missouri can help all working families – even those in low-paying jobs — have the opportunity to build better lives and economic security. Read on to learn more:
Give me the elevator speech on EITC.
The federal EITC is a tax credit available only to working people and the size of a worker’s credit is based on their income. For those with very low earnings, the dollar value rises with each additional dollar earned, up to a point, which encourages people to stay working and to work more hours. The federal EITC reduces federal income taxes, payroll taxes for Social Security and Medicare, and excise taxes, and leaves hardworking families with more to make ends meet.
States can do the same thing, by providing hardworking families a further boost toward the middle class. Today, 26 states and the District of Columbia have built on the success of the federal EITC by enacting state versions that offer a credit towards state and local taxes for low-wage workers struggling to get by.
So, what are a state EITC’s benefits to Missouri?
- + A bottom-up tax cut for working families. A state EITC would reduce state taxes for working men and women that need – and would use – a tax cut most. Families with incomes up to $53,300, depending on family size, qualify for the federal EITC and could be eligible for a Missouri EITC. The largest tax credit would accrue to families with incomes below $37,000, and phase out as incomes rise.
- + Help Missourians meet basic needs and strive towards the middle class. Twenty percent of Missouri households claimed the federal EITC in 2013.[1] It helped more than 515,000 families pay for basics like child care and car repairs. A state EITC could help further — enabling families to pay for gas to get to work or to take a community college class to advance their job skills.
- + Boost local economies. A state EITC would put more money in the pockets of people likely to spend it at local businesses to buy groceries or pay for child care or other basic needs items.
- + Improve the lives of Missouri’s children and Missouri’s future workforce. Children whose families receive the federal EITC have higher test scores, are more likely to go to college, and enjoy greater earnings as adults,[2] establishing a more productive and skilled workforce for Missouri’s future.
Is there any evidence on the effectiveness of EITC?
Yes. In fact, 26 states have enacted a supplemental state EITC. Missouri is not one of them. Studies find the EITC encourages and rewards work and reduces poverty. Check out some the research at the Center on Budget and Policy Priorities, the Brookings Institute or Missouri Budget Project.
I’m not convinced, but I want to learn more.
The Missouri Budget Project is a great place to start to learn about Missouri-specific EITC Benefits. Visit the Missouri Budget Project’s site here.
I’m on board, how can I support an EITC?
We’re glad you want to help strengthen working families and local communities! You can help out by sharing information about EITC with your friends, family, and elected officials. Find your elected representatives here. And be sure to include the infographic below when you share information.
Social Media Language: “Hundreds of thousands of working Missourians would see a little extra boost from a state Earned Income Tax Credit – helping them make ends meet, and boosting the local economy. #MOEITC”
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[1] IRS Data analyzed by the Brookings Institution. Available at http://www.brookings.edu/research/interactives/eitc
[2] “EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds,” Center on Budget & Policy Priorities. April 3, 2015.