Legislation to Restore Tax Credit Would Benefit
Approximately 220,000 Families Statewide
OKLAHOMA CITY (30 January 2017) – A measure has been filed to restore a provision that the Legislature deleted from the earned income tax credit last year to help plug a $1.3 billion state budget deficit.
House Bill 1474 was introduced by Rep. George E. Young, Sr., to counter the adverse effects of Senate Bill 1604 enacted last year
The Oklahoma EITC previously was “refundable,” which meant that families received the full value of the tax credit even if it exceeded their income-tax liability. “Refundability is critical to the success of the EITC because it allows the credit to reward work and support families even if workers have small state income-tax bills,” the Oklahoma Policy Institute reported.
SB 1604 eliminated the refundability feature, effective with the 2016 tax year, and thereby will increase state income tax collections by an estimated $29 million.
SB 1604 reduced or eliminated the benefit for nearly two-thirds of the 334,000 Oklahoma families who claim the tax credit, and thus slashed its value for working families by almost three-quarters. More than 5,400 of those families live in Representative Young’s legislative district.
Oklahoma’s earned income tax credit is equal to 5% of the federal EITC. The maximum tax credit for a family with two children has been $277; for a family with three children, $312. The credit is designed to encourage work by supplementing earned income from lower-wage jobs.
The state’s EITC was created in 2000 during the administration of Republican Gov. Frank Keating, and had enjoyed bipartisan support as a means of keeping working families out of poverty.
However, because of SB 1604, a single mother with two children and working full-time at $10 an hour will experience a tax increase of $231, and a married couple with three children and earning $20,800 a year will realize a tax hike of $313, the Oklahoma Policy Institute calculated. The average loss will be $91 per family, according to an analysis by the Institute on Taxation and Economic Policy.
Young said SB 1604 had a detrimental effect in multiple ways on his House District 99, which stretches from northeastern to northwestern Oklahoma City.
Ÿ District 99 receives the largest state EITC benefit payments: $737,600 in 2013 (the latest year for which data is available).
Ÿ The district has the greatest number of families receiving the EITC: 5,487 in 2013.
Ÿ 81% of the EITC recipients in House District 99 are “families raising children,” Young said.
Ÿ The financial loss to the district attributed to enactment of SB 1604 is more than half a million dollars; the benefit in 2013 was $545,182, ledgers reflect, “the largest EITC amount of any legislative district in this state,” Young said.
“Why this burden should be placed on the people of my district – where the very benefit of this credit has been doing the most good – is beyond any sensible reasoning.”
The Earned Income Tax Credit can be claimed only by people who have earned income – that is, employment income from a job. They pay income taxes through payroll deduction. The credit helps low-wage workers avoid paying a disproportionate percentage of their income in taxes and is the single most effective “program” to lift people out of poverty, Young said.
Athough EITC recipients don’t owe additional taxes at the end of the year, payroll taxes are withheld from their paychecks throughout the year, he added.
The EITC was created with bipartisan support from Republicans and Democrats alike “to encourage working families struggling in low-income jobs,” Young said. Its purpose, in part, was to help working families climb out of poverty, he said.
EITC recipients pay their “fair share,” Young emphasized. They pay income taxes and sales taxes, and many pay property taxes, too. The people who qualify for the earned income tax credit pay a higher percentage of their annual income in taxes than do the wealthy, he said.