For the last few months, I’ve been volunteering as a tax preparer with the Louisville Asset Building Coalition, helping individuals and families who earn less than $50,000 prepare their taxes. I’ve seen young students filing and single, working moms who are simultaneously raising children and going to school file taxes. I’ve heard stories about individuals falling on hard times in the last few years, and met one person who was working his way out of homelessness. As families across the state and the country rush to meet today’s deadline to file their 2012 tax returns – many, particularly those people I met, probably don’t need the reminder that everyone pays taxes. But everyone does pay taxes on things like earned income, goods purchased, property, and gas.
It costs more to be poor. When sales, excise, property, and income taxes are all taken into account, low income workers pay a larger share of their income in taxes than higher income individuals. That means those with the least disposable income pay a higher percentage of their overall income to live and work in Kentucky. For example, Kentuckians making an average of $38,000 currently pay ten cents on the dollar when sales, excise, property, and income taxes are all taken into account. Compare this to those who make an average of $980,000 and only pay six cents on the dollar in taxes.
The Federal Earned Income Tax Credit (ETIC) provided additional support to many of the families I’ve met over the last few months. It is a tax credit that low-income, working families can receive to help offset other taxes, like payroll taxes. The EITC helps make sure that people who work hard are able to meet basic needs, support their families, and stay off welfare. Kentucky can go one step further by implementing a state EITC. Federal and state EITCs don’t just get and keep people working; they are also shown to improve infant health, boost children’s achievement in school, and boost work effort and earnings when children become adults. Implementing a state EITC in Kentucky would be a small investment that can make a big difference in the lives of working families. It’s time Kentucky joins 25 other states, including Indiana, Illinois, and Virginia, and implement one.
So today, as people scramble to file their taxes, and as we hear about all the problems with our tax code, we need to remember that the EITC is not one of those problems. We should make sure that the wealthiest Americans are paying their fair share and that we are not penalizing families working for low wages or cutting the nation’s most successful anti-poverty program for children.