February 5, 2021 – New Jersey Policy Perspective (NJPP) applauds the introduction of a new proposal to boost the pay of low-paid workers and their families.
The bill, S3428/A5345, introduced on Thursday by Senator Joe Lagana (D-Bergen, Passaic) and Assemblywoman Verlina Reynolds-Jackson (D-Mercer, Hunterdon), would expand the eligibility of the state Earned Income Tax Credit (EITC) to workers who are at least 18 years of age, regardless of whether or not they have children. It would also eliminate the maximum age limit for workers without qualifying children, allowing workers who are 65 years or older to claim the credit.
“The success of Earned Income Tax Credit (EITC) has been recognized across the political spectrum,” said Senator Joe Lagana (D-Bergen, Passaic). “By upholding our commitment to further expand this program to all eligible workers over 18, we can help more young people get their finances under control and give hard-working seniors some much-needed relief. The need for relief for these workers during the pandemic is as great as ever and our local businesses will benefit from the increased spending power this proposal would create for many residents.”
The EITC is a refundable tax credit for low- and moderate-income working individuals and families. The tax credit was established by the federal government in 1975; since 2000, New Jersey has supplemented the program with a state version of the credit
“This legislation is timely as so many New Jerseyans are struggling to make ends meet amid uncertain times,” said Assemblywoman Verlina Reynolds-Jackson (D-Mercer, Hunterdon). “More residents should be able to claim the Earned Income Tax Credit (EITC) which has helped many retain more of their income at the end of the year. They have earned it. Young adults entering New Jersey’s workforce deserve to be included in the provisions of the EITC as they are working to build something for themselves and their families. Thank you to all who have worked with me on this legislation and support it. It’s a much-needed economic boost for New Jersey families.”
Due to the EITC’s narrow eligibility requirements – including restrictions based on age, family type and size, residence, and immigration status – far too many workers miss out on this resource.
“Strengthening the EITC is a critical way to improve economic security throughout New Jersey, both during and beyond the current crisis,” said Vineeta Kapahi, Policy Analyst at New Jersey Policy Perspective (NJPP). “This tax credit has long been an effective tool for reducing poverty and putting money in the pockets of workers who need it, but too many workers are excluded from this credit due to narrow eligibility requirements. By expanding access to the EITC, New Jersey can help workers make ends meet while supporting state and local economies.”
Fortunately, New Jersey lawmakers have taken steps to improve the tax credit with proposals to expand eligibility and raise benefit levels. A pair of bills introduced by Senator Vin Gopal (D-Monmouth) and Assemblywoman Verlina Reynolds-Jackson, S765/A839 and S764/A840, would increase the tax credit for workers without children and allow qualifying relatives to count as qualifying children, respectively.
“New Jersey can always improve upon ways to support hard taxpaying workers,” said Senator Vin Gopal (D-Monmouth). “Making changes to the state EITC to expand credit from the current 40 percent to 100 percent over time to individuals without children, and to also allow people to claim a relative as a qualifying child for tax purposes will boost their economic security, and improve their quality of life. Especially in these trying times, we need to come up with solutions to provide prosperity for all of our residents, and making changes to the state EITC is an important step in the right direction.”
Under current law, workers under 25 and over 64 are not eligible for the federal EITC if they do not claim dependent children when they file taxes. Last year, New Jersey partially addressed this by lowering the state EITC eligibility for childless workers to 21 years of age. Several other states, including Minnesota, Maryland, and California, already expanded EITC eligibility for childless workers.
“The EITC puts money directly in people’s pockets and is a proven tool for fighting inequality and stimulating the economy,” said Assemblyman Raj Mukherji (D-Hudson). “Every penny spent through this program will circulate back to our small businesses and local communities, creating jobs and equitable growth. This is a sensible investment into the working families of our state at a time when they need it the most.”
The EITC is one of the most effective policies at reducing poverty and one of the wisest investments a state can make. In 2018 alone, the federal and state EITCs benefitted over 576,000 New Jersey workers and infused nearly $2 billion into local communities across the state.
“Every dollar invested in the Earned Income Tax Credit (EITC) program is a dollar well spent on reducing income inequality in New Jersey and helping low and moderate-income families build wealth and economic security,” said Dena Mottola Jaborska, Associate Director at New Jersey Citizen Action. “EITC investments are also the most strategic way to deliver COVID relief to the families who will suffer the worst economic setbacks brought on by the pandemic, for years to come. As one of the state’s largest free tax preparation agencies, New Jersey Citizen Action has seen the EITC tax credit transform the economic well-being of families. We urge the Legislature to move this EITC expansion bill package in its entirety.”
- S3428/A5345: Expands eligibility under New Jersey earned income tax credit program to allow taxpayers who are at least 18 years of age or older to qualify for the modified benefit.
- S836/A841: Increases benefit amounts under New Jersey earned income tax credit program from 40 percent to 50 percent.
- S765/A839: Increases benefit amounts incrementally under New Jersey earned income tax credit program from 40 percent to 100 percent for resident individuals who cannot claim qualifying child.
- S764/A840: Enhances benefit provided under New Jersey earned income tax credit program by treating a qualifying relative as a qualifying child.
- S2194/A4229: Expands eligibility under New Jersey earned income tax credit program to allow taxpayers with Individual Tax Identification Numbers to qualify.