Policy Matters Ohio is now pushing an earned income tax credit (EITC) that would benefit the state’s poor and middle class, including more than 822,000 working families. The plan could be a progressive replacement for Republican Gov. John Kasich’s proposed tax plan, which some reports claim disproportionately benefits the wealthy. The EITC is a tax credit targeted at working people who have low to moderate income, particularly those with children. It is currently used by the federal government, 24 states and Washington, D.C. The report from Policy Matters, a left-leaning policy research group, found a 10-percent EITC would cost about $184 million per year, producing an estimated $224 million in economic benefits, and a 20-percent EITC would cost about $367 million per year, producing an estimated $446 million in economic benefits. If state legislators set aside Gov. John Kasich’s tax proposals, the state would be left with about $280.4 million in general revenue available for fiscal year 2014 and about $690.2 million available in fiscal year 2015, according to an analysis of Kasich’s budget bluebook. That would be more than enough money in fiscal year 2014 to pay for a 10-percent EITC, and even a 20-percent EITC would only eat up about half of available funds in fiscal year 2015. Using a model from the nonpartisan Institute for Tax and Economic Policy, the Policy Matters report found a state EITC would benefit Ohioans making less than $51,000 per year. Under a 10-percent credit, qualifying families making less than $18,000 would get $190 on average, qualifying families making between $18,000 and $33,000 would get $323 on average and qualifying families making between $33,000 and $51,000 would get $149 on average, according to the report. Under a 20-percent credit, benefits would be bumped up to $381 on average for qualifying families making less than $18,000 per year, $646 on average for qualifying families making between $18,000 and $33,000 and $298 for qualifying families making between $33,000 and $51,000, according to the report. These benefits would then be spent in a way that helps families, local communities and small businesses, according to the Policy Matters report: “Families that claim the EITC use the refunds to pay for basic needs like housing, food, transportation and child care. These purchases stimulate local economies. A number of studies focusing on the economic impacts of the EITC find that small businesses and other taxes benefit from a cash infusion into the local economy.” The report claims a state EITC would also result in a fairer tax system that better helps the state’s low- and middle-income earners, stronger incentives to work and better social and economic results for EITC recipients. The Policy Matters report touts the federal EITC, which was created by former President Gerald Ford in 1975 and has been expanded by every presidential administration since, to support adopting a similar policy in the state: “The federal Earned Income Tax Credit does more than any other program to keep working families out of poverty. … (It) is lauded for its direct impact in keeping families with children above the poverty line, making work pay, and sending federal dollars to local communities.” Anyone making $50,270 a year or less qualifies for the federal EITC. The tax credit is built so it particularly benefits families with children, and it “encourages families making at or near minimum wage to work more hours since the credit has a longer, more gradual phase-out range compared to other programs,” according to the Policy Matters report. The report says the federal EITC has already benefited more than 950,000 Ohio families with an average refund of $2,238. In previous analyses, Policy Matters found Kasich’s tax proposals disproportionately benefit the wealthy and actually raise taxes on the state’s poor and middle class (“Smoke and Mirrors,” issue of Feb. 20). But Kasich says his tax plan will cut taxes for “job creators,” particularly the state’s small businesses. The governor’s tax proposals are facing bipartisan resistance, and the Republican-controlled Ohio House is currently considering setting the proposals aside while the rest of the budget is worked out, according to Gongwer. In a press conference on March 14, local officials around the state, including Councilman P.G. Sittenfeld, suggested dropping income tax cuts and instead using the revenue to restore local government funding cuts, which have totaled $1.4 billion since Kasich took office.

A nonpartisan think tank that advocates for poor and working class families is urging that Ohio adopt its own version of the federal Earned Income Tax Credit (EITC).   The group, Policy Matters Ohio, said a state version of the federal tax credit, set at 10 percent, would divert just $210 million from Ohio’s coffers but would benefit 949,000 low-income working families across the state. Such a credit would provide families with an average of $221 each, which Policy Matters Ohio described as “modest but helpful.”   Currently 24 states and the District of Columbia have Earned Income Tax Credits, ranging from 3.5 percent to 50 percent of the federal credit.   “A state EITC program enables families to work and build assets while reducing the impact of regressive income tax changes,” said a statement released by Policy Matters Ohio.   “A state EITC makes sense because recent changes to the personal income tax have provided greater tax reductions for higher-income earners than they have for lower- and middle-income families,” the statement continued.   The federal EITC is a refundable tax credit for low- and medium-income individuals and couples, and is considered the nation’s largest poverty relief program. When the credit exceeds the amount of taxes owed, it results in a tax refund to those who qualify and claim the credit.   To qualify for the EITC, a recipient must have earned income of $49,000 or less. The credit is worth significantly more for families with children and is refundable, which means families receive cash refunds above their tax liability.   Created in 1975, the federal EITC is aimed at helping lift families with children about the poverty level, along with offsetting the burden of Social Security taxes and maintaining an incentive for people to work.   In Ohio, 949,692 people currently claim the federal EITC. The credit generates $2.1 billion for state residents, and the average refund is $2,211.   Founded in 2000, Policy Matters Ohio is a nonprofit, nonpartisan policy research organization that seeks to create “a more prosperous, equitable, sustainable and inclusive Ohio,” through research and policy advocacy.   Based in Cleveland and Columbus, the organization is funded primarily through grants from groups like the Ford Foundation, the Sisters of Charity Foundation, the Center on Budget and Policy Priorities, the Corp. for Enterprise Development and others.