Arthur pushes for state Earned Income Tax Credit program

  

JEFFERSON CITY, Mo. — Maintaining she’s keeping in-line with the state Senate’s mission, Sen. Lauren Arthur is pushing to establish an earned income tax credit in Missouri.

Earned income tax credits (EITCs) already exist at the federal level, and 29 states — as well as the District of Columbia — have implemented their own programs. EITCs reduce the amount of taxes people with lower incomes are liable for and can sometimes provide refunds.

“I’m really passionate about passing an earned income tax credit this year. One of the stated goals of this legislature, it appears, is putting more money back into the pockets of hardworking Missourians,” Arthur, a Democrat, told The Missouri Times. “The EITC is a proven tool in helping lift millions of people out of poverty and incentivizing work.”

SB 183 would phase in a tax credit for those qualifying proportional to the federal EITC amount. It would begin at 5 percent of the federal amount in January 2020 and increase annually until it reached 20 percent by January 2023.

As it’s written now, Arthur’s plan would also include provisions for lower-income people who don’t qualify for the federal EITC. The credit for these taxpayers would amount to a few hundred dollars, depending on the year and filing status. 

Under Arthur’s proposal, the tax credits would go toward a person’s income tax liability after all other reductions have been applied. If there is still an excess left over from the tax credit, the remainder would be refunded to the taxpayer.

Arthur said the refundability portion of the bill isn’t a “giveaway” since it’s tied to a person’s work.

“The credit, people have to earn,” she said. “We included refundability because it has had the most impact in lifting people out of poverty and really allows people to put that money back into the local economy.”

PAST PROPOSALS

Multiple state lawmakers — in both chambers of the General Assembly — have proposed bills establishing an EITC for the state.

Sen. Caleb Rowden, the current Majority Floor Leader, proposed legislation establishing an EITC in 2017. His bill would have created a tax credit of 20 percent of the taxpayer’s federal earned income tax credit for those who qualified.

However, Rowden’s bill would have not allowed any excess funds to be refundable to the taxpayer.

“The EITC is a proven tool in helping lift millions of people out of poverty and incentivizing work.”

EITCs “are a good middle-of-the-road approach vehicle to provide some tax relief really aimed at working Missourians,” Rowden told The Missouri Times. “Sometimes we struggle to find ways to incentive folks to work. [EITCs] checks boxes on both sides — that you’re helping lift folks out of poverty or onto the next rung of the economic ladder, but you’re also doing it in a way that isn’t just straight entitlement that can be a little more controversial or partisan.”

Rowden noted some Senate Republicans aren’t on board with an EITC program that allows for refunds but contended it would need to be a conversation with the full Senate of what exactly should be included in the bill. He also said there has been “some opposition in our caucus that we have to figure out a way to navigate.”

NEXT STEPS

Additionally, Arthur’s bill allows the Missouri Department of Revenue to inform taxpayers — including through a partnership with a nonprofit — of eligibility for a tax credit. Although it doesn’t stipulate which nonprofits it can partner with, it encourages the department to work with those whose members have low to moderate income levels and those with more than half of its board members who reside in “target communities” with low to moderate incomes.

Arthur said there’s already bipartisan support for her EITC bill — albeit she’s open to tweaking it to get more on board. She also contended legislators need to work to bring the bill’s fiscal note down as legislation that could cost “hundreds of millions of dollars” would be “pretty irresponsible” to pass.

At the federal level, the maximum amount awarded for 2018:

  • $6,431 for a taxpayer with three or more children
  • $5,716 for a taxpayer with two children
  • $3,461 for a taxpayer with one child
  • $519 for a taxpayer with no children

Qualifying income requirements vary if a taxpayer is filing singularly or as the head of a household versus a married couple filing jointly. For example — at the federal level — a married couple filing jointly without children must have an earned income of less than $20,950 to qualify; a single filing without children must have an earned income of less than $15,270 to qualify.