(TRENTON) – Legislation sponsored by Speaker Sheila Y. Oliver and Lou Greenwald to help working poor families by restoring the New Jersey Earned Income Tax Credit cut by Governor Christie was released 8-4 Friday by the Assembly Budget Committee.
The Earned Income Tax Credit is a credit for working poor residents who work and have earned income. The governor reduced the credit from 25 percent of the federal tax credit to 20 percent in 2010, effectively raising the income tax liability for New Jersey families by $45 million. The bill (A-3029) would reverse the cut and restore the program to its previous level of 25 percent.
“Many working families in New Jersey are financially strapped. The last thing they need is a tax increase, but that’s exactly what they’re getting with the governor’s cut,” said Oliver (D-Essex/Passaic). “It’s beyond me how the governor and Republicans can justify tax cuts for millionaires while saddling poor working families with tax increases, but if they won’t help working people, we will.”
“New Jersey’s poor working families need financial relief now more than ever. Reducing the tax credit only makes their financial situation more dire,” said Greenwald (D-Camden/Burlington). “The governor’s obsession with tax cuts for millionaires at the expense of working families is unconscionable. We have a responsibility to all residents of this state, especially those who work and still struggle to make ends meet. Let’s give these families the resources they need to earn their way out of poverty.”
According to federal and state data, some 528,000 taxpayers received an average state Earned Income Tax Credit (EIC) benefit amount of approximately $430 during fiscal year 2010, the most recent year for which data is available. Under the bill, the average EIC benefit amount would grow to approximately $545, assuming a level number of participants.
The governor claimed he was proposing restoration of the credit to 25 percent in his fiscal year 2013 budget address, when in actuality, he planned to restore half of the reduction in fiscal year 2014 and the other half in fiscal year 2015, meaning there would be no restoration of benefits in the fiscal year 2013 budget. This bill would restore the credit to 25 percent for tax year 2012, thereby providing the full restoration in fiscal year 2013. The bill would take effect immediately.
The state credit is based on the federal credit, considered the nation’s largest and most successful anti-poverty program. Created in 1975 to ease the burden of payroll taxes for the working poor, the federal earned-income tax credit was expanded by President Reagan, and has substantially reduced child poverty and increased incentives to work. Twenty-four states created their own credits to extend tax relief for their residents, based on a percentage of the federal credit.