MECEP strongly supports LD 695 and LD 707. Expanding the state earned income tax credit and making it refundable are two of the best actions this Committee and the Legislature could take to strengthen our working families and encourage economic growth.
Under Maine law, a taxpayer generally can receive a credit equal to five percent of the federal earned income tax credit, although the maximum credit was 4% for the 2009 and 2010 tax years. Therefore, the maximum benefit in the 2010 tax year is $227 for taxpayers with three or more qualifying children, $201 for taxpayers with two qualifying children, $122 for taxpayers with one qualifying child, and $18 for taxpayers with no qualifying children. The state EITC, however, is not refundable.
In 2009, approximately 46,000 Maine taxpayers received the state EITC. Of the approximate 46,000 taxpayers, more than 10,300 taxpayers earned $20,000 or less, more than 18,100 taxpayers earned between $20,001 and $30,000, more than 13,700 taxpayers earned between $30,001 and $40,000, and more than 3,800 taxpayers earned more than $40,000.
The EITC is a tax credit that benefits Maine’s working families and individuals. As Maine Revenue Services noted in its 2012-2013 Tax Expenditure report, the credit “[c]reates incentive[s] for individuals to enter the workforce. It raises the after-tax income of lower and moderate income families, especially those with dependents.” Indeed, the EITC helps put more money in the hands of working families, which encourages economic growth. Expanding the credit and making it refundable will put additional money in their pockets, which will be spent in the local economy supporting local businesses.
Expanding the credit to 10% of the federal credit would mean the maximum credit would be $567 for families with three or more qualifying children, $504 for families with two qualifying children, $305 for families with one qualifying child, and $46 for families/individuals with no qualifying children. Raising the credit to 25% would increase the maximum credit to $1,417 for families with three or more qualifying children, $1,259 for families with two qualifying children, $763 for families with one qualifying child, and $114 for families/individuals with no qualifying children. Either approach is a win- win situation and represents a sound approach to economic growth.
In addition to encouraging economic growth, a robust state EITC encourages work, lifts children and families out of poverty, offsets the regressivity of tax systems, and aids economic development initiatives. Strengthening the EITC will help ensure work pays for many Maine families struggling to afford even basic necessities. Indeed, former President Ronald Reagan once called the EITC “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”
The Maine EITC, along with the federal EITC, has enjoyed a long history of bipartisan support. MECEP encourages this Committee to continue that support by passing LD 695 and LD 707.
Dan Coyne, Fiscal Policy Analyst, testifying before the Joint Standing Committee on Taxation in favor of LD 695, “An Act to Reduce Taxes and Promote Employment,” and LD 707, “An Act to Increase the State Earned Income Credit.”
