Tax Hikes on New Jersey’s Poorest Working Families Enter Fifth Year

Despite the continued insistence that his administration has not raised taxes on any New Jerseyans, the governor’s proposed budget continues a 20-percent tax increase for low-income working families by failing to restore the state Earned Income Tax Credit (EITC) to 2009 levels. If the EITC is not restored in the 2015 budget, about a half-million New Jersey families will have lost between $250 and $300 million in crucial tax credits that help them get a leg up in high-cost New Jersey. Some of the poorest families have lost $331 a year, totaling $1,650 over five years.

The solution to this problem is simple: Enact legislation to restore the EITC to 25 percent of the federal level. The $50 million cost in a $34 billion budget is minimal, but the positive impact on families is substantial. The EITC promotes work, improves children’s school performance and increases children’s earnings once they reach adulthood. It is one of the most effective anti-poverty tools in existence.

But the governor, who has rejected multiple attempts to restore the credit, continues to insist these half-million families will not have their tax hike reversed until most everyone else in the state gets some kind of tax cut. They will be held hostage until the governor delivers on his frequent pledge to “help the most vulnerable New Jerseyans” by signing restoration of the EITC credit.

Unfortunately, the news gets worse for EITC filers.

On top of the effective tax hike, nearly one in five EITC filers have had their credits delayed by an enhanced fraud screening process started in 2012, as first revealed last year by the Office of Legislative Services. As of September 30 of last year, over 90,000 EITC filers were still waiting for more than $45 million in credits from 2011. In seven months, the treasury managed to resolve only about 10,000 detoured filings. In addition, over 100,000 EITC filers were still waiting for more than $60 million in credits from 2012. Many of these filers are likely having their credits for both years delayed, and since the state’s made no final eligibility determination, most are likely to file for the EITC again for 2013.

The legislative budget committees should press the treasurer about what’s going on and why so many low-income working families are being left in the lurch. They should request updated information for tax years 2011 and 2012 and find out what actions the state is taking to resolve the issue more efficiently so that eligible families can receive their credits.

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