Decision to Trim Earned Income Tax Credit by 20 Percent Means a Smaller Safety Net

From NJ Spotlight, August 8, 2012:

Jennifer Rosado used to receive about $1,250 from the state in the spring, which would help her pay her bills and deal with unexpected expenses.

That was before Gov. Chris Christie cut a tax credit program aimed at low-income workers — the Earned Income Tax Credit — in 2010. The governor, as part of the budget that ended in 2011, reduced the payment by 20 percent, which resulted in a loss of $300 in each of the past two years for Rosado.

According to NJPP’s analysis, nearly half a million families — 1.5 million individuals — lost a total of $100 million in tax credits the past two tax years, or an average of $200 per family.

“There has been a 25 percent increase in the number of families below the poverty line since the recession started,” said NJPP Senior Policy Analyst Raymond Castro. “The EITC is a good way to deal with it.”

The cut also amounts to a tax increase on the working poor, for whom the cut can equal as much as a week’s salary, Castro said.

“They are the only group paying more in taxes than they were since Christie took office,” Castro said. “The credit is used to defray state and local taxes. The average low-income person pays $2,700 in all of these other taxes. The EITC defrays that.”

Castro added that the EITC should not be caught up in the tax cut debate. “Working class people should not be held hostage to budget negotiations,” he said.

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