LOOK AT THE TITLE OF THIS ARTICLE----'THE BLUE STATES' TAX THE POOR MORE-----these are not BLUE states folks----they are right-of -center neo-liberal states. If they were BLUE----Democrats would be controlling policy.
Think to yourself-----if the middle-class is disappearing and will take a big blow this coming economic crash-----if the middle-class have for the past century been the heaviest taxed group -----and if corporations are paying less, less, less-----who will fill all that tax revenue? THE WORKING POOR. That is what this coming corporate tax reform is about. We will watch global neo-liberals pretending to fight for child and earned income credits that protect the working class from higher tax rates-----but we know Clinton/Obama neo-liberals will go with Republicans and gut these credits to pay for lower corporate tax rate.
Developing nations always soak the poor and family businesses with taxation. This is to what the American Revolution was directed-----ever higher taxes from a global corporate tribunal---the Queen and East India Corporation. Well, Trans Pacific Trade Pact and International Economic Zone policies take the US back to colonial status.
Look where taxation is going locally and think how that will soar with the coming economic crash.
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“There has been a groundswell of poorly thought-out proposals to hike taxes on poor people at the state level,” Gardner said. “The good news is that a lot of states have zeroed in on these [good proposals].”
GovBeat
The state that taxes the poor the most is… a blue one
By Niraj Chokshi September 21, 2013
(Credit: Daniel Acker/Bloomberg)The state that easily handed President Obama a victory last November while passing voter-approved referendums legalizing same-sex marriage and marijuana consumption also happens to have the nation’s highest tax burden on the poor.
Poor families in Washington state pay 16.9 percent of their total income in state and local taxes, more than any other state in the nation, according to a new report from the nonprofit Institute on Taxation and Economic Policy, which advocates for progressive tax policies.
Washington takes the top spot by a sizable lead. For the poor in Illinois, 13.8 percent of their income goes to paying state and local taxes. In Florida, those taxes eat up 13.3 percent of the income of the poor. The share in Hawaii is 13 percent, followed by Arizona at 12.9 percent.
(Source: ITEP)Tax policy can do a lot of things—spur good economic activity and discourage the bad—but ITEP argues it can also be used to fight poverty.
“Any time when one in six americans are living in poverty it’s important to ask what our public policies can do to make that better,” says ITEP Executive Director Matt Gardner. “It’s important to remember that state tax codes can play a role in mitigating poverty as well.”
New Census data released on Thursday showed that while poverty rates showed no change in 43 states last year, they remained high. Even in the best-performing states, such as New Hampshire, Alaska and Maryland, a tenth of the population still lives in poverty. The rate was highest in Mississippi, where nearly a fourth of the state—24 percent—were living in poverty last year.
ITEP argues that states can implement and expand four simple, effective tax strategies to ease the tax burden on states’ poorest residents. Some 26 states have enacted a state Earned Income Tax Credit based on the federal version, which ITEP encourages states to expand or consider implementing. Eighteen states have “true” property tax “circuit breakers,” which are designed to offset the burden of property taxes that are high relative to income. Other targeted low-income credits and child-related credits would also reduce the burden on the poor, ITEP argues.
“There has been a groundswell of poorly thought-out proposals to hike taxes on poor people at the state level,” Gardner said. “The good news is that a lot of states have zeroed in on these [good proposals].”
While ITEP criticized states across the board for increasing the tax burden on the poor over time, the report cites three states that have done relatively well. Vermont, for example, is home to one of the least regressive tax systems in the nation, ITEP finds. Delaware’s system isn’t very progressive, but its reliance on income taxes and low use of consumption taxes created a system that’s “only slightly regressive overall.” And New York and the District of Columbia have “close-to-flat” tax systems.
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AS THE MIDDLE-CLASS IS ELIMINATED---THEY BECOME THE LOW-INCOME WORKER JUST AS ALL LOW-WAGE TAX PROTECTIONS ARE ELIMINATED BY GLOBAL CORPORATE POLS.
Below you see the tax advantages Republicans have been trying for decades to end-----it is yet another War on Poverty progressive policy that Clinton/Obama neo-liberals are killing as fast as Republicans....BECAUSE NEO-LIBERALS ARE REPUBLICANS. Clinton and Obama have championed the end of all New Deal and War on Poverty and these progressive tax credits will be on the list during this corporate tax reform push these coming months. You will hear Clinton neo-liberals protest and pretend they are all about protecting low-income families----but they are the ones partnered with Republicans in all wealth and corporate tax evasion----AND SOMEONE MUST CREATE THIS REVENUE.
In Maryland we have seen Erhlich to O'Malley raising taxes, fees, and fines continuously while giving copious tax breaks to corporations----corporate subsidy----and allowing widespread corporate fraud. The rise in taxation on the working class is directly tied to this dismantling of taxes at the top. O'Malley and Maryland's global corporate neo-liberals will say they are being forced to raise taxes at state and local level because of the austerity at the Federal level----AND THIS IS TRUE----but you can tell when this is just an excuse from a pol looking to be one of those Clinton/Obama neo-liberals giving Wall Street and corporations everything they want. Baltimore is tax-starved because of corporate tax-free zones, corporations allowed to use independent contractor and call themselves non-profits and that is not done because of Federal policy---
We already see where the poor are now pulling most of the revenue burden as taxes rise on utilities, property taxes only in specific areas of Baltimore----and this will soar after this coming economic crash and planned push of Baltimore into bankruptcy. Much of these tax policies are meant to move people out of communities for development----but for those thinking this is the only purpose----THE UPPER-MIDDLE CLASS WILL BECOME THE NEXT SOURCE TO SOAK.
This is a long article but glance through to see the next War on Poverty policy that Clinton/Obama neo-liberals will join Republicans to end and think how a low-income family will find that money from an already too low wage. This hits immigrant families as well.
It is the conservative Democratic and Republican voters who will be harmed as much as the Democratic base and they will be the ones shouting while it is Republican policy to heavily tax the poor.
EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds
UPDATED
October 1, 2015
BYChuck Marr, Chye-Ching Huang, Arloc Sherman, and Brandon DeBot
The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which go to millions of low- and moderate-income working families each year, provide work, income, educational, and health benefits to its recipients and their children, a substantial body of research shows. In addition, recent ground-breaking research suggests the income from these tax credits leads to benefits at virtually every stage of life. For instance, research indicates that children in families receiving the tax credits do better in school, are likelier to attend college, and can be expected to earn more as adults.
Numerous studies show that working-family tax credits boost work effort. The EITC expansions of the 1990s contributed as much to the subsequent increases in work among single mothers and female heads of households as the welfare changes of that period, extensive research has found. Women who benefited from those EITC expansions also experienced higher wage growth in subsequent years than otherwise-similar women who didn’t benefit. And, by boosting the employment and earnings of working-age women, the EITC boosts the size of the Social Security retirement benefits they ultimately will receive.
In addition, the research shows that by boosting the employment of single mothers, the EITC reduces the number of female-headed households receiving cash welfare assistance. As the University of California’s Hilary Hoynes writes, the EITC “may ultimately be judged one of the most successful labor market innovations in U.S. history.” The CTC is newer and has not been studied to the same extent, but it shares key design features with the EITC: it is available only to working families and phases in as earnings increase.
The EITC may also improve the health of infants and mothers, research indicates. Infants born to mothers who could receive the largest EITC increases in the 1990s had the greatest improvements in such birth indicators as low-weight births and premature births. As one researcher notes, “income transfers to pregnant women through a work-conditional tax subsidy substantially improves the health of their new born children.” Similarly, mothers who received the largest EITC increases in the 1990s had greater improvements in their own health indicators.
Moreover, research suggests that income from the EITC and CTC leads to improved educational outcomes for young children in low-income households. For each $1,000 increase in annual income over two to five years, children’s school performance improves on a variety of measures, including academic test scores. A credit that’s worth about $3,000 (in 2005 dollars) during a child’s early years may boost his or her achievement by the equivalent of about two extra months of schooling.
The credits’ success in boosting work effort and earnings extends into the next generation, the new research indicates. Children whose families receive more income from refundable tax credits do better in school, are likelier to attend college, and likely earn more as adults; they also are likelier to avoid the early onset of disabilities and other illnesses associated with child poverty, which further enhances their earnings ability as adults, some research suggests.
Finally, the EITC and CTC greatly reduce poverty for working families. These working-family tax credits lifted 9.4 million people out of poverty in 2013, including 5 million children, and made 22 million other people less poor. And by encouraging work, the EITC and CTC have an additional anti-poverty effect not counted in these figures. Recent research on EITC’s effects on single mothers’ employment shows that counting the employment-boosting effect of the EITC nearly doubles its anti-poverty effect for these families. These anti-poverty effects are particularly important since large numbers of Americans work for low wages, the minimum wage’s purchasing power is substantially lower than in the 1960s and 1970s, and job growth thus far in the economic recovery has been disproportionately concentrated in low-wage occupations.
As economists Austin Nichols and Jesse Rothstein summarize in a recent review of the literature on the EITC:
Researchers have documented beneficial effects on poverty, on consumption, on health, and on children’s academic outcomes. The magnitude of these effects is large: Millions of families are brought above the poverty line, and estimates of the effects on children indicate that this may have extremely important effects on the intergenerational transmission of poverty as well. Taking all of the evidence together, the EITC appears to benefit recipients — and especially their children — substantially.
How the EITC and CTC Work
The EITC, a federal tax credit for low- and moderate-income working families and individuals, is designed to encourage and reward work, offset federal payroll and income taxes, and raise living standards. To claim the credit, a taxpayer must have earnings from a job. The EITC is “refundable,” meaning that if it exceeds a low-wage worker’s federal income tax liability, the Internal Revenue Service refunds the balance to the taxpayer.
The EITC’s primary recipients are working parents with children, though a small EITC is available to working adults without dependent children. The credit rises with earned income until reaching a maximum (which varies by the number of qualified children) and then phases out as income rises further. For 2015, the phase-outs begin at about $18,810 for single filers with children and about $23,630 for married filers with children, and the average size of the credit is likely to be close to its 2013 value of $3,074 for a family with children and $281 for a family without children. Twenty-six states plus the District of Columbia also offer a state EITC, typically set at a percentage of the federal EITC.
The CTC, which provides taxpayers up to $1,000 for each dependent child under age 17, is designed to help families offset the costs of raising children. Unlike the EITC, the CTC not only helps low- and moderate-income families but extends to middle-income and most upper-middle-income families as well, because it phases out at higher income levels than the EITC.
Like the EITC, the CTC increases with earnings, but unlike the EITC, the first $3,000 in earnings do not count when determining the CTC. Families receive a refund equal to 15 percent of their earnings above $3,000, up to the credit’s full $1,000-per-child value. For example, a mother with two children who works full time at the federal minimum wage — earning $14,500 in 2015 — will receive a refund of $1,725 (15 percent of $11,500). This refundable part of the CTC, called the Additional Child Tax Credit, is particularly beneficial to lower-wage workers.
The CTC is newer than the EITC and has not been studied to the same extent, but like the EITC it is available only to working families and phases in as earnings increase. Research strongly suggests that low-income families do not understand how much of their tax refund comes from the EITC or the CTC, but they do understand that if they work they can qualify for significant tax-based benefits.Moreover, research shows that boosting working families’ incomes is associated with improvements in children’s educational (and other) outcomes, strongly suggesting that both credits improve opportunities for children.
Encouraging Work
The EITC significantly increases recipients’ work effort, according to substantial research over the past two decades. (As noted, the CTC shares key design features with the EITC, suggesting that it may also have positive work effects.)
The EITC is particularly effective at encouraging work among single mothers working for low wages. It is considered among the most effective policies for increasing the work and earnings of female-headed families.
Single mothers are the group most likely to be eligible for the EITC because they tend to have low earnings and qualifying children. As Figure 1 shows, single mothers experienced a marked increase in paid employment following the EITC expansions of the early 1990s, relative to married women and single women without children. Economic studies controlling for other policy and economic changes during this period also found that the most significant gains in employment attributable to the EITC occurred among mothers with young children and mothers with low education. In their literature review, Nichols and Rothstein note “essentially all authors agree that the EITC expansion led to sizeable increases in single mothers’ employment rates, concentrated among less-skilled women and among those with more than one qualifying child.”
Other research has found that EITC expansions between 1984 and 1996 accounted for more than half of the large increase in employment among single mothers during that period. The EITC expansions of the 1990s “appear to be the most important single factor in explaining why female family heads increased their employment over 1993-1999,” University of Chicago economist Jeffrey Grogger has concluded. Those expansions, he found, actually had a larger effect in increasing employment among single mothers than the 1996 welfare law. (See Figure 2.) In addition, women who were eligible to benefit the most from those EITC expansions apparently had higher wage growth in later years than other similarly situated women.
By boosting employment among single mothers, the EITC also reduces cash welfare caseloads significantly. The EITC expansions of the 1990s induced more than a half a million families to move from cash welfare assistance to work, research shows. In fact, Grogger’s research found those EITC expansions likely contributed about as much to the fall between 1993 and 1999 in the number of female-headed households receiving cash welfare assistance as time limits and other welfare reform changes.
Moreover, by boosting the employment and earnings of working-age women, the EITC also boosts their Social Security retirement benefits, which are based on a person’s work history. Higher Social Security benefits, in turn, reduce the extent and severity of poverty among seniors.
There is little evidence that when EITC benefits phase down as a family’s income rises above certain levels, workers substantially reduce their work hours. Instead, research shows, the EITC has a powerful effect in inducing many more workers to enter the labor force and go to work.
Improving Infant and Maternal Health
The EITC may improve the health of infants and mothers, research finds. Research looking at the EITC’s effects on maternal health found that women who were eligible for the largest EITC expansion in the 1990s experienced significant improvement in a variety of health indicators, including reduced mental stress, compared to similar women who would not have been eligible for the expansion.
Researchers at the University of California at Davis compared changes in birth outcomes for mothers who likely received the largest increases in their EITCs under the expansions of the 1990s and mothers who likely received the smallest increases. They found that infants born to mothers who likely received the largest increases had the greatest improvements in a number of birth indicators, such as fewer low-weight births and premature births. Also, mothers who likely received the largest increases were likelier to receive prenatal care, including care before the critical third trimester, and to smoke and drink less during pregnancy. Changes in health insurance coverage did not seem to be a primary explanation for these improved health outcomes.
Other studies have also found strong associations between EITC expansions and improvements in birth weight and indicated that mothers receiving the EITC were less likely to smoke during pregnancy than similarly situated mothers who did not receive it.
Boosting Children’s School Achievement and College Attendance Rates
Income support from the EITC and CTC has been linked to better academic achievement for elementary and middle-school students. Studies have found that children in low-income families that receive larger state or federal EITCs tend to score better on tests of reading and (particularly) math, compared with children from largely similar families not targeted for large credit expansions. They also are more likely to finish high school and go on to college.
In addition, larger tax refunds make college more affordable for low-income families with high-school seniors and are associated with significant increases in their college attendance.
A recent working paper examining data from before and after changes to federal and state EITCs finds that children receiving larger EITCs tend to do better academically in both the short and long term. Receipt of larger EITCs is linked to:
- Higher test scores, particularly in math. Larger EITCs are linked to improved test scores in the year of receipt for both elementary and middle-school students.
- Higher high-school graduation rates. Children who qualify for a larger EITC in childhood are more likely to graduate high school or complete a General Educational Development (GED) degree.
- Higher college attendance rates. The larger the EITC a child’s family receives, the more likely he or she will enter college by age 19 or 20.
This paper adds to an already substantial body of evidence that the EITC and CTC boost school performance:
- Researchers who analyzed data for grades 3-8 from a large urban school district and the corresponding U.S. tax records for families in the district linked additional income from the EITC and CTC with significant increases in students’ test scores.
- Likewise, researchers who studied nearly two decades of data on mothers and their children concluded that students with additional income from the EITC had higher combined math and reading test scores by large magnitudes.
The working-family tax credits can also improve a low-income child’s chances of attending college by making it more affordable. A recent paper finds that college enrollment rates tend to rise with family earnings up to the earnings level where a family qualifies for the maximum EITC (the EITC “kink point”), at which point both enrollment rates and the size of a family’s EITC level off. (See Figure 3, reproduced from the study.) This striking relationship, the researchers conclude, is evidence that, for a high-school senior whose family almost or just qualifies for the maximum EITC, a $1,000 increase in tax refunds received in the spring increases college enrollment rates the next fall by roughly 10 percent.
The study’s authors suggest that receiving the EITC in the spring before college helps cash-strapped families afford college: “[T]he tax refunds that we study may effectively alleviate credit constrain[t]s for families with high-school seniors, allowing youths from these families to attend college.” They also find that both federal and state EITCs increase college enrollment, noting, “[T]he enrollment response is larger in states that offer tax refunds tied to federal refundable credits.”
Nichols and Rothstein conclude from their review of the literature: “Taking all of the estimates together, there is robust evidence of quite large effects of the EITC on children’s academic achievement and attainment, with potentially important consequences for later-life outcomes.”
Boosting Work Effort and Earnings When Children Reach Adulthood
Not only do the EITC and CTC boost the work effort of parents, particularly single mothers, but the benefits extend to the next generation, recent research suggests.
Because higher family income from working-family tax credits is associated with higher skills, children in the family likely earn more as adults. In fact, researchers projected that each dollar of income through tax credits may increase the real value of the child’s future earnings by more than one dollar.
For young children raised in low-income families, even slight increases in family income — regardless of the source — are associated with more work and higher earnings in adulthood, relative to children raised in otherwise similar circumstances. For children in low-income families, an extra $3,000 in annual family income (in 2005 dollars) between their prenatal year and fifth birthday is associated with an average 17 percent increase in annual earnings and an additional 135 hours of work when they become adults, compared to similar children whose families do not receive the added income, researchers have found. (See Figure 4.)
One reason for poorer children’s lower work effort and earnings, according to an emerging field of research, may be that they are more likely to experience poor health as children, which in some cases carries into adulthood. Thus, children in households that receive slightly higher incomes appear likelier to avoid the early onset of disabilities and other illnesses associated with child poverty, which apparently helps them earn more as adults.
In short, studies indicate that young children in low-income families that receive income support (which could include the EITC and CTC) perform better in school, on average. They also are likely to be born healthier and to grow up to work more and earn more. “When analyzing the costs and benefits of policies such as the Earned Income or Child Tax Credit,” researchers from Harvard and Columbia University advised, “policymakers should carefully consider the potential impacts of these programs on future generations.”
Reducing Poverty
The EITC and CTC reduce current poverty and inequality in at least two ways (1) by supplementing the wages of low-paid poor or near-poor workers; and (2) by encouraging work.
Many Americans work for low wages. For example, the food-preparation sector (cooks, servers, dishwashers, and the like), which employs more than 12 million people and accounts for about one in every 11 jobs, provided a median wage of only $9.20 an hour in 2014. A full-time, year-round worker at that wage level would have annual earnings of $18,400 — or less than 80 percent of the poverty line for a two-adult, two-child family.
For many workers, working substantial hours is not enough to lift them out of poverty. The recent recession and slow recovery have aggravated the situation. The share of workers paid below-poverty wages (hourly wages too low to support a family of four at the poverty line even with full-time, year-round work) rose from 25.5 percent in 2009 to 28 percent in 2012. While mid-wage jobs made up 60 percent of the jobs lost during the recession, they made up only 22 percent of the jobs gained during the recovery, according to an analysis by the National Employment Law Project that goes through the first quarter of 2012. Lower-wage jobs, in contrast, represented 21 percent of the jobs lost during the recession but 58 percent of jobs gained during the recovery.
The share of Americans earning low wages may keep growing even as labor market conditions improve. “Good jobs are not disappearing for everyone, but . . . they are largely disappearing for less-educated workers,” Urban Institute economist Harry Holzer and his coauthors from the National Science Foundation, the University of Chicago, and the Treasury Department have written.
Meanwhile, policymakers have let the minimum wage erode substantially. At $7.25 an hour in 2015, the federal minimum wage is 24 percent below its 1968 level, after adjusting for inflation. The minimum wage and EITC are both important policies that help low-wage workers make ends meet, and both should be strengthened. They are also complementary: they function best when both are strong because each helps fill gaps that the other can’t fully address on its own, and neither is sufficient by itself.
In addition, the median or typical wage paid for half of the ten occupations that the Bureau of Labor Statistics expects to generate the most new jobs over the 2012-2022 period — home health aides, food preparers, personal care aides, retail salespersons, and janitors and cleaners — was below a poverty-level wage in 2012.
By supplementing the earnings of low-paid workers, the EITC and CTC lifted 9.4 million people out of poverty in 2013 and made 22 million others less poor (see Figure 5). (These figures are based on the federal government’s Supplemental Poverty Measure, which many analysts favor because it counts non-cash public benefits and refundable tax credit payments as income.) These working-family tax credits lifted 5 million children out of poverty, more than any other program.
These figures do not count a second way that the EITC and CTC may reduce poverty — by encouraging work. When the income gains from the increase in employment the EITC generates are taken into account, the EITC’s impact in reducing poverty significantly increases, University of California economist Hoynes and the Treasury Department’s Ankur Patel find in recent research. Analyzing the 1990s EITC expansions for single mothers aged 24-48 who lack a college degree, Hoynes and Patel find that when the EITC’s employment and earnings effects are taken into account, the number of people in such families that the EITC lifts out of poverty nearly doubled.
Hoynes and Patel examined these families, not EITC beneficiaries as a whole, so they could not similarly calculate the extent to which the EITC’s employment and related earnings effects increase the overall number of people the EITC lifts out of poverty. But based on the anti-poverty impacts they find with respect to the mothers and children they examined, they provide a rough estimate that the standard estimate of the total number of people the EITC lifts out of poverty may understate the true number by “as much as 50 percent.”
Further, the emerging research discussed above suggests that by improving children’s health and educational outcomes, and by leading to higher earnings as adults, the working-family tax credits also may reduce poverty in the next generation.
Each of these factors also reduces inequality by boosting the after-tax income of low-wage workers relative to high-income earners.
Additionally, as noted above, 26 states and the District of Columbia have built on the success of the federal credits by offering their own EITCs, which further reduce poverty and inequality.
How Families Use Their Tax Credits
The Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), also known as the working-family tax credits, represent a substantial share of many families’ annual budgets. Because the tax credits are delivered in a lump sum once a year at tax time, they not only help families pay routine bills, but also make major purchases, such as a car to get to work or security deposit on a new apartment, that they’re often not able to make otherwise. Research suggests that families receiving the EITC typically spend their tax refunds on these expenses and paying current bills, as well as paying down debt and building assets.a
One major study conducted a short survey and in-depth follow-up interview of 194 families that received an EITC of at least $1,000 in tax year 2006 to discern how families actually used their refunds. The study found that the families spent roughly half of EITC refunds on current consumption, such as groceries, child expenses, and furniture.b They spent the other half paying off past-due bills and debt, and for “asset-building” such as savings, education, or home ownership and home repairs. Nearly two-thirds of families spent part of their refunds on expenses related to raising children, and about one-third made car purchases or repairs.
These findings, particularly for major expenses, are consistent with expenditure patterns and self-reported use of tax refunds. For example, two Chicago Federal Reserve Bank economists found that EITC recipients were devoting a sizable share of their tax refunds to large expenses over 1997 to 2006.c They found that households likely to be eligible for the EITC spent more on durable goods in February — presumably after they’d received their tax refunds (including the EITC) — than in other months, and also relative to other households that were not likely to receive the EITC. EITC-eligible households were particularly likely to purchase vehicles in February. Similarly, various other surveys of EITC recipients have found that most intend to use their refunds to invest in economic and social mobility, such as savings for improved housing or children’s education and car or other transportation expenses that are vital for employment opportunities, as well as making ends meet in the short term.d
Providing a Short-Term Safety Net
The latest research, which covers years before the Great Recession and an EITC expansion, shows that the EITC provides ongoing income support for some low-wage workers but helps even more workers meet a temporary need. “The EITC,” researchers found, “acts as a short-term safety net to many taxpayers who claim the EITC for short periods during shocks to income or family structure” — a child’s birth, for instance, or one spouse’s loss of income — after which their earnings grow again.
Some 61 percent of those who received the EITC between 1989 and 2006 did so for only a year or two at a time. (See Figure 6.) About half of all taxpayers with children used the EITC at least once during that 18-year period. With its broad but temporary reach, the EITC provides critical income insurance for working families that face hardship or must care for newborns or very young children.
In addition, low-income households pay substantial taxes. Most state and local tax systems are regressive, meaning that low-income families pay a larger share of their incomes in these taxes than more affluent households do. The bottom fifth of households paid an average of 10.9 percent of their incomes in state and local taxes in 2012, according to the Institute on Taxation and Economic Policy (ITEP), compared to 9.4 percent for the middle fifth and 5.4 percent for the top 1 percent. (ITEP also found that in most states, families in the bottom income fifth paid a larger share of their incomes in state and local income, property, sales, and excise taxes than families in the top end of the distribution.) Also, some EITC recipients pay significant federal income taxes over time, even though they may receive more in EITC benefits in a given year than they pay in federal income taxes in that year.
Conclusion
Recent ground-breaking research suggests that the EITC and CTC help families at virtually every stage of life. In addition to the credits’ well-established benefits of encouraging work and reducing poverty, recent research suggests that starting from infancy — when higher tax credits are linked to more prenatal care, less maternal stress, and signs of better infant health — children who benefit from tax credit expansions have been found to do better throughout childhood and have higher odds of finishing high school and thus going on to college. The education and skill gains associated with the CTC and EITC likely keep paying off for many years through higher earnings and employment, researchers say. This growing body of research highlights the positive long-term benefits of the working-family tax credits for millions of families.
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AND BALTIMORE'S POLS FOR CITY COUNCIL AND MAYOR ARE STILL ALL TIED TO WALL STREET ECONOMIC POLICY THAT CAUSES ALL THESE PROBLEMS.
Maryland has dismantled Federal and state tax offices that used to be easily accessible to the public for tax advice and replaced them with predatory private tax corporations that are simply pay-day lenders of the tax business. If Maryland was a functioning Democratic state---it would have computers identify which families are eligible for which tax breaks and services and then have a system to notify people through the mail when they are eligible and not filing---A REMINDER. Maryland and Baltimore has made sure it does not have this reminder and Baltimore citizens often never use any of these War on Poverty tax benefits. Baltimore, where the most citizens would be eligible has absolutely nothing as a reminder---and that is because Baltimore is neo-conservative, not Democratic. I'm sure other southern Republican states have done the same. Obama and Clinton neo-liberals in Congress want all these low-wage tax credits disappear. There are not only at the Federal level----as you see, it is at state level too. See why O'Malley loaded the state with bond-leverage debt? The state and city will be 'forced' to end these credits because of lack of revenue.
Maryland Earned Income Tax Credit
If you qualify for the federal earned income tax credit and claim it on your federal return, you may be entitled to a Maryland earned income tax credit on the state return equal to 50% of the federal tax credit. The Maryland earned income tax credit (EITC) will either reduce or eliminate the amount of the state and local income tax that you owe.
For tax year 2014, the earned income tax credit is allowed if you meet the following conditions:
- You have three or more qualifying children and you earn less than $46,227 ($51,567 if married filing jointly).
- You have two qualifying children and you earn less than $43,038 ($48,378 if married filing jointly).
- You have one qualifying child and you earn less than $37,870 ($43,210 if married filing jointly).
- You do not have a qualifying child and you earn less than $14,340 ($19,680 if married filing jointly).
You may qualify for the Maryland earned income tax credit even if you're not required to file a Maryland tax return. However, you must file a return to claim the state tax credit, using Form 502 (or Form 505 or Form 515 if you are a nonresident).
Refundable Earned Income Tax CreditIf the earned income tax credit exceeds your Maryland tax liability, you may be entitled to a refund. Complete the Refundable Earned Income Credit Worksheet in Instruction 21 of the tax booklet.
The refundable earned income credit is calculated as 25% of your federal earned income credit, less your state income tax liability. If this amount is zero or less, no refund is due. The refundable amount of the credit may not be carried forward to any other tax year.
Local Earned Income Tax CreditIf you are a Maryland resident who qualifies for the state earned income credit, you may also qualify for a local earned income tax credit. Complete the Local Earned Income Credit Worksheet included in Instruction 19 of the tax booklet. The unused local income tax credit may not be refunded or carried forward to any other tax year.
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Below you see what this writer politely calls 'irony'. Obama created myRA to tax the lowest wage earners under the guise of a savings account. Raise your hand if you think NOW is the time to create yet another revenue source in the US Treasury to be looted?
INDEED, THESE FUNDS ARE A TAX ON THE POOR AND WILL BE LOOTED AS OUR SOCIAL SECURITY TRUST WAS.
'So here's the irony: The myRA will actually have the working poor financing the government's deficit spending. By creating accounts that invest in a government pool, it's yet another way for the Treasury to raise funds without having to sell bonds in the public markets'.
Obama and Clinton neo-liberals allowed Social Security to be gutted of funding with these US Treasury bond leverage frauds--and the trillions of other Wall Street frauds and since the middle-class payroll tax deductions are dwindling----they are now going to tax the poor with myRA. They pretend this will be a voluntary deduction but it will look just like a payroll deduction that instead of going into a public Trust----will go right to a criminal stock market.
Remember, they are imploding the US Treasury bond funds and need new revenue sources.
My, oh myRA, what a misguided bureaucratic mess this will be
Scott Hanson, Special to CNBC.com
Wednesday, 12 Feb 2014 | 7:00 AM ETCNBC.com
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Barack Obama's newly created retirement account (myRA) will do very little to help the working poor and will quickly become another bloated bureaucratic system that wastes billions of taxpayer dollars.
The myRA (which stands for My Retirement Account) plan will authorize the Department of the Treasury to create a new type of savings plan for those workers who do not have access to an employer-sponsored retirement plan. Deposits into myRA are not tax deductible, but instead grow tax-deferred and come out tax-free upon retirement.
While at first glance this looks similar to a Roth individual retirement account (IRA), the mechanics of the myRA plan are decidedly different.
Rather than having savers choose from a variety of investments available in the marketplace, myRA establishes a fund that invests in a government-managed program guaranteed by taxpayers.
(Read more: Roth IRA conversion and state income tax)
The fund would be similar to the Thrift Savings Plan Government Securities Investment fund, which is already available to federal workers.
So here's the irony: The myRA will actually have the working poor financing the government's deficit spending. By creating accounts that invest in a government pool, it's yet another way for the Treasury to raise funds without having to sell bonds in the public markets.
While this may not have been the original intention behind its creation, it's an important consequence nonetheless.
The president said in his State of the Union address that this program "guarantees a decent return with no risk of losing what you put in." Yet just last year, the guaranteed fund within the government's Thrift Savings Plan earned about 1.5 percent, which is hardly the type of return that will help a person grow his or her retirement plan.
Besides, the U.S. government already has a program in place that pays the working poor to put money into retirement accounts. Depending upon income, taxpayers match 50 cents on the dollar for every dollar that is contributed to an IRA or employer-sponsored retirement plan. That's right. Just like large employers that offer a company match on 401(k) deposits, so, too, does the government offer a match for low-income savers.
The Retirement Savings Contribution Credit, also called the Saver's Credit, isn't exactly a match that is deposited into a retirement account. Rather, it comes in the form of a credit on one's income-tax return.
The credit, which phases down over time from 50 percent to 10 percent, is available for single filers with adjusted gross incomes of up to $30,000 and for married couples with incomes up to $60,000. The credit is limited to $1,000 per individual, but it's not a refundable credit, meaning that it only offsets a person's federal income-tax liability.
This is of nominal value to those who pay little or no income tax.
The Saver's Credit was designed to encourage the working poor to save for retirement, but from every study that I've seen, it hasn't made a dent in the savings rates. It's extremely difficult to imagine that the creation of yet another government program is going to move the savings needle in a positive direction.
"Isn't it time to admit that government programs simply are not the answer? A new government plan that offers a whopping 1.5 percent return is not going to entice anyone to save more."Because of competing needs and desires, not to mention emergency expenditures, it's not easy to save for retirement. This, of course, is particularly true for people with low incomes. A middle-class family may elect to pare back a family vacation in order to prepare for the future, but for the working poor, saving for retirement is next to impossible.
Correct me if I am wrong, but wasn't Social Security created to be the stopgap that helped seniors who didn't have retirement savings?
Given that we still have a large percentage of poor retirees in spite of this gigantic government system, isn't it time to admit that government programs simply are not the answer?
A new government plan that offers a whopping 1.5 percent return is not going to entice anyone to save more. No one who is struggling to make ends meet will make the decision to go without getting the kids new shoes so they can put a few dollars into a myRA plan.
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