Tackle inequality, coronavirus with tax credits for working families | Opinion

Nicole Rodriguez

As the COVID-19 pandemic continues to rock the global economy, governments at every level are scrambling for ways to support vulnerable workers and their families. There is certainly a need for new and creative thinking to meet these new challenges, and that includes expanding existing programs like the Earned Income Tax Credit (EITC).

Over the past several decades, income growth in New Jersey and across the country has primarily gone to the top 1 percent of households, doing very little to improve the lives of middle-class and low-income families. The past decade saw a booming economy, stock-market highs, and record low-unemployment, yet far too many New Jerseyans continue to struggle.

The sad truth is that there are more New Jerseyans living in poverty in 2020, even before the COVID-19 outbreak hit, than there were before the Great Recession over a decade ago. This is bad news for everyone, regardless of their income, as poverty hurts the economy, increases public health risks, and ultimately weakens our communities.

The good news is that poverty isn’t an enigma. We know what works at lifting families out of it and what doesn’t. That’s precisely why New Jersey, and the nation, should expand the Earned Income Tax Credit (EITC).

The last two months saw the largest decline in retail jobs since December 2009, when the economy was coming out of deep funk.

The EITC has a strong track record as one of the most effective anti-poverty programs in the nation’s history, having lifted millions of children out of poverty and helping New Jersey’s working families make ends meet.

More:NJ must step up to meet nursing home crisis within a crisis | Editorial

More:Donald Trump's relentless war on accountability

The way it works is simple. If you are a low-to-moderately-paid worker, the EITC provides a much-needed boost to your take-home pay in the form of a refundable tax credit. This is necessary in today’s economy as many low-wage jobs fail to provide enough income for a family to live on. By lowering the tax burden of low-paid workers, it also makes the tax code fairer, as these families often pay a higher share of their income in state and local taxes than the top one percent of households do.

Yet, the EITC leaves far too many families behind due to its narrow eligibility criteria. Many young workers are excluded from the EITC, as are workers who are not raising children at home. Current state policy also excludes residents who are over 65 years old from qualifying for the credit. Thankfully, there is movement at both the federal and state level to expand the EITC.

While the speed of the recovery in stock prices is surprising, the fact stocks have gone up before the economy recovered is not. Stock prices and the health of the economy are linked but not nearly as tightly as most people think.

At the federal level, New Jersey Representatives Donald Norcross (D-2) and Bonnie Watson Coleman (D-12) have co-sponsored the Working Families Tax Relief Act, which would expand the EITC for families with children by about 25 percent. It would also substantially strengthen the tax credit for workers who are not raising children at home. In total, the bill’s EITC expansions would raise the incomes of over 600,000 working families in New Jersey.

More:Coronavirus: Flag order is a recognition of mourning, sacrifice | Lowry

At the state level, the Legislature is considering several bills that would significantly improve the EITC by increasing benefit rates and expanding eligibility beyond the current federal rules. By lowering the eligibility age for childless workers to 18, allowing workers without children to claim an elder relative they care for as a dependent, and expanding the tax credit to workers with Individual Taxpayer Identification Numbers (ITIN), New Jersey can treat all workers with the dignity they deserve and set them on a path to future success.

All in all, these proposals would benefit more than 400,000 New Jersey families and drive over $200 million back into the state’s economy. As EITC recipients typically use the credit to purchase basic necessities immediately and locally, these bills would also provide a much-needed benefit to main street businesses in every corner of the state.

Few policy changes would have a bigger or broader positive impact than expanding the EITC. State and federal lawmakers simply cannot ignore this opportunity, especially during the COVID 19 health crisis, to increase the incomes of low-paid workers, lift families out of poverty, and create an economy that works for everyone.

Nicole Rodriguez is the Research Director at New Jersey Policy Perspective (NJPP), a nonpartisan think tank that promotes economic, social, and racial justice through evidence-based, independent research, analysis, and advocacy.