By Sarah Stecker

INTRODUCTION

Rarely has a poverty-fighting tool been so highly regarded as the Earned Income Tax Credit. Liberals and conservatives embrace it; Democrats and Republicans vote for it. When it comes to “making work pay” the features of the EITC are seen as exemplary. Indeed, it is assistance available only to working people.

When New Jersey enacted its own version of the EITC in 2000 it joined other states in taking a major step to help people who are working hard but having trouble getting by. At the time, however, there were aspects of the EITC that made New Jersey stand out from other states in a negative way. To put it bluntly, New Jersey’s EITC was decidedly less generous than those elsewhere.

Two years have passed. Information now exists as to how many New Jerseyans have claimed state EITC benefits. During that period some changes have occurred in the federal EITC, more states have established EITCs, some states have expanded benefits and New Jersey’s budget crisis has contributed to expansion of some taxes that fall disproportionately hard on lower income people. This report examines where New Jersey now stands, and offers recommendations for improving the EITC. Unquestionably, the more than $100 million New Jersey has given out in tax credits over two years has been very helpful to the recipients. But the state EITC could become a better, more effective path out of poverty for the men, women and children of the state.

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