Gathering Place
Brian Schatz

It’s time for a state earned
income tax credit

Tax relief for Hawaii's most overburdened families is long overdue. Now that the state is looking at a large state budget surplus, we must take action in this upcoming session.

Governor Lingle wants "attention on relief for those who need it most." To this end, she is proposing an increase in the standard deduction and new tax credits on food and medicine. These aren't bad ideas, but there's a better, more cost-effective solution.

A state earned income tax credit, or EITC, is a proven policy that smartly focuses tax relief on those families with children who earn less than a living wage. "Red states" such as Kansas and Oklahoma and "blue states" like Massachusetts and New York have passed refundable state EITCs for the simple fact that they make a bigger difference in people's lives.

For example, under the governor's $22 million plan to increase the standard deduction, a single parent with two children making $20,000 per year would see a measly $2 more in every paycheck. A refundable state EITC would provide that same family with a tax refund of more than $600, which could be used to pay off high interest debt, create a savings account, get child care to go to job interviews, invest in starting a small business, or pay for vocational training.

The governor has opposed a state EITC before taking a good look at its merits. Her tax plan is scripted by the Tax Foundation of Hawaii, which calls the EITC "back-door welfare," despite the fact that President Reagan called the federal EITC "the best anti-poverty, the best pro-family, and the best job-creation measure to come out of Congress."

As the conservative Wall Street Journal correctly observed, "There exists a serious program in the form of the earned income tax credit that actually helps the working poor in a way that promotes work and discourages welfare. The EITC was originally a Republican idea -- started by the Ford administration in 1975 and expanded by the Reagan administration during the glorious 1980s and the Bush administration in 1990."

Rather than take her cues from the single entity that opposes a state EITC, I urge her to listen to the community. Last session, Good Beginnings Alliance, Aloha United Way, Alu Like, homeownership advocates, rural economic development organizations, volunteer tax preparers, policy researchers, and many others provided convincing evidence for a state EITC. Based on their arguments, my fellow Democrats and House Republican colleagues joined in unanimous support of a state EITC.

We need to get back to fact-based policy making. I strongly urge Governor Lingle to stop boxing herself into her own proposals and to take a reasonable look at this effective tax relief measure. If her goal is to truly help struggling families with tax relief, she will find no better proposal on the table than a state EITC.

Brian Schatz is a Democratic member of the state House representing Tantalus and Makiki.

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