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Increasing Both the Earned Income Tax Credit and the Minimum Wage Would Strengthen Wisconsin’s Families

7:57 am in Uncategorized by WI Budget Project

From www.wisconsinbudgetproject.org.

State lawmakers who want to help Wisconsin families recover from the recession should move to boost both the state’s earned income tax credit and its minimum wage. Each policy on its own helps make work pay for families struggling on low wages, but improving them at the same time goes further to putting working families on the path to economic security and opportunity, according to a new report from the Center on Budget and Policy Priorities.
Earned Income Tax Credit
Low wages make it hard for working families to afford basics like decent housing in a safe neighborhood, nutritious food, reliable transportation, quality child care, or educational opportunities that put families on a path to greater economic security.

But, state lawmakers have tools that can help address stagnant low wages. One, increase the state Earned Income Tax Credit. Two, raise the state minimum wage and make future increases automatic to keep up with inflation

These policies both are targeted to assist only those who are working, helping them to better afford basic necessities, including the things that allow them to keep working, like car repairs and child care.

Improving both Wisconsin’s EITC and minimum wage will boost the income of low-paid workers and help keep many Wisconsin workers and their families out of poverty. Doing so would reduce the widening gap between the rich and those working in low-wage jobs, which holds our economy back.

Together the EITC and minimum wage do a better job of getting low-income children on a better path. The increase in family income can mean that kids go further in school and have higher future earnings in adulthood.

Both policies mean that low-paid working households can spend a bit more at local businesses – paying for things like gas, groceries, and child care – which is good for the economy.

Boosting the EITC and the minimum wage could help large numbers of workers. In Wisconsin, an increase in the state EITC could help keep taxes low for the more than 250,000 working parents who received the credit. Increasing the minimum wage to $10.10 would give a raise to more than half a million Wisconsin workers, and improve the family incomes of 234,000 children in the state.

Unfortunately, Wisconsin lawmakers give little sign of using either of these policy tools in the near future to improve the earning power of families with low incomes. Raising the minimum wage is not an issue that breaks neatly along party lines; some prominent Republicans, including 2012 Republican presidential candidate Mitt Romney, have voiced support for increasing the wage floor.  But in Wisconsin, Governor Walker called a proposal to raise the state’s minimum wage a “misguided political stunt,” and the legislature hasn’t taken up the issue. Far from improving the state’s EITC, Wisconsin lawmakers made deep cuts to that credit in 2011, increasing the amount of taxes paid by working families with children by $114 million over the last four years.

Together, a bigger EITC and a higher minimum wage can help struggling Wisconsin families make ends meet, boost the state’s economy, and improve children’s chances in life. Wisconsin lawmakers should use these tools to help working families and individuals achieve economic security.
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Wisconsin Budget Compounds the Economic Challenges for Low-Wage Workers

11:46 am in Uncategorized by WI Budget Project

The underside of the Wisconsin Capitol Dome

How Wisconsin’s budget cuts hurt workers.

Workers in Wisconsin and across the U.S. must still cope with a relatively weak labor market.  That is especially challenging for low-wage workers who are struggling with the declining value of the minimum wage, reductions in employer benefits like health care, and growing inequality. Those challenges are exacerbated in Wisconsin by budget decisions made by state lawmakers.

A new Wisconsin Budget Project issue brief examines how the how state budget choices are affecting low-wage workers in Wisconsin.  It focuses primarily on the effects of the new budget bill, but also examines a few instances of how that bill continues or compounds the challenges for low-wage workers caused by the 2011-13 budget.

Some of the major effects include the following policy choices relating to health insurance, child care, taxes and unemployment insurance:

Making health insurance and care much more expensive for many parents now in BadgerCare

The 2013-15 budget bill cuts in half the income eligibility ceiling for adults participating in BadgerCare – reducing that cap from 200% of the federal poverty level to just 100%.  That change is expected to cause nearly 90,000 low-income parents and about 5,000 childless adults to lose their BadgerCare coverage, beginning in 2014.  The good news is that Wisconsin is extending coverage to about 80,000 childless adults below the poverty level, but the decision to cap eligibility at that level and turn down enhanced federal funding from the health care reform law means that a single individual with a minimum wage job is ineligible for BadgerCare if he or she is working 30 or more hours per week.

The issue brief analyzes the effect of the budget for a single mother who has two children and an income of $11 per hour (and currently has now BadgerCare premiums and minimal copays).  Beginning in January, when she loses her BadgerCare coverage, she will have to buy insurance through the new Marketplace and will have to pay premiums of about $460 per year and will have significant co-pays and deductibles, which could be as much as $2,250 per year.

Charging premiums for parents in Transitional Medicaid

The state is now seeking a federal waiver that would not only restrict eligibility for BadgerCare, as described above, but would also change another form of Medicaid, known as Transitional Medical Assistance (TMA) by initiating premiums for parents between 100% and 133% of the federal poverty level. If that waiver is approved, parents who climb above the poverty level would struggle to be able to regularly pay the premiums and many are likely to lose their insurance coverage.

Additional cuts in child care subsidies – adversely affecting accessibility and affordability of care

The budget cuts an additional $31 million over the next two years from the Wisconsin Shares child care subsidy program for low-income working families (on top of large cuts in prior years).  Although that cut reflects the estimated cost of maintaining the status quo, it is likely to adversely affect many low-wage workers by causing more child care providers to drop out of the subsidy program and by indirectly increasing co-pays for parents participating in Wisconsin Shares.

Continuing last session’s tax increases for low-income households                                                         

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Federal Tax Credits Keep Wisconsin Children Out of Poverty

8:25 am in Uncategorized by WI Budget Project

Two federal tax credits are responsible for lifting tens of thousands of Wisconsin children out of poverty. Together, the Earned Income Tax Credit and the Child Tax Credit lift 136,000 Wisconsinites out of poverty, including 71,000 children, according to a new report from the Center on Budget and Policy Priorities.

Children on swingset on Wisconsin playground

Two key tax credits keep Wisconsin children out of poverty.

The new CBPP report underscores how important the two credits are to low- and moderate-income families with children. The federal EITC benefits about 390,000 households a year in Wisconsin, and the CTC benefits 296,000 households.

The benefits of these credits go beyond just helping families make ends meet. We’ve long known that in addition to lifting families out of poverty, refundable credits like the EITC encourage work, improve the health of children, and help children do better in school. New, groundbreaking research shows that many of these benefits last into a child’s adulthood. In later life, children whose families receive the credits are likelier to attend college, work more hours, and earn more money.

The extensive list of long-lasting benefits would seem to make investing in these credits a no-brainer. But both the EITC and the CTC have been topics of budget battles recently, as the President and Congressional Republicans disagreed over whether to extend recent temporary enhancements to the credits that were expiring. In the fiscal cliff negotiations, Congress reached a compromise position that extended the enhancements for five years, rather than making them permanent. Those enhancements benefit 155,000 Wisconsin families, including 320,000 children.

At the state level, investment in the EITC has declined – and some policymakers are trying to reverse that. Assemblyman Daniel Reimer has proposed legislation that would restore the cuts in the EITC made in the last budget. Such a move would keep taxes low for working families, and would have long-term benefits for Wisconsin’s children.

For more, go to www.wisconsinbudgetproject.org

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