Expanding Maine’s EITC and Making It Refundable Will Strengthen Our Working Families and Encourage Economic Growth

Economic, social and community justice advocates urge the Legislature to reduce the state tax burden on low and moderate income families

Augusta, Maine (Thursday, March 31, 2011)—Representatives from three of Maine’s leading economic justice advocacy organizations today urged the members of the Legislature’s Joint Standing Committee on Taxation to support L.D. 695, “An Act to Reduce Taxes and Promote Employment” and L.D. 707, “An Act to Increase the State Earned Income Credit.” Established by Congress in 1975, the Earned Income Tax Credit (EITC) enables qualified low to moderate income working individuals and families to reduce their tax burden. Maine’s EITC complements the federal program, enabling qualified individuals and families to reduce their state tax burden. Spokespersons for the Maine Center for Economic Policy (MECEP), Maine Equal Justice Partners (MEJP) and Maine Women’s Lobby planned to present testimony at a public hearing today on the two bills.

“Expanding the state EITC 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,” said MECEP Fiscal Policy Analyst Dan Coyne. “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.”

Coyne noted that former President Ronald Reagan called the federal EITC “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

The IRS estimates that over 26 million people received nearly $59 billion in federal EITC last year. 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.

“Increasing the state EITC and making it refundable would help the State of Maine to better address a fundamental problem – too many Mainers go to work every day, but still struggle to afford the rising costs of basic necessities, such as housing, food and gasoline,” said MEJP Policy Analyst Robyn Merrill. “The cost of raising a family continues to grow and wages for low and moderate income households are not keeping up. The EITC is one of most effective tools available to a state to address this problem of declining wages and help working families make ends meet.”

The federal EITC is refundable, meaning that when the tax credit exceeds the amount of taxes paid, qualified individuals and families are eligible for a refund. Currently, Maine’s EITC is not refundable. Both L.D. 695 and L.D. 707 would expand the state EITC and make it refundable.

“The EITC is a simple investment not only in working families but in our local economy,” said Laura Harper, MWL’s Director of Public Policy. “It’s a quick and easy way to put dollars in the pockets of the folks most likely to spend them locally in food and housing.”