Earned Income Credit

Action Alert

Support an Earned Income Credit for Pennsylvanians

House Bill 377, which is expected to considered by the PA General Assembly next week, would amend the Tax Reform Code of 1971 to provide for an earned income credit (EIC) equal to 30% of the federal Earned Income Credit. The EIC would help move low-income working families out of poverty and make Pennsylvania’s tax system more equitable.

What You Can Do:

Please call, e-mail or write your Pennsylvania state representative urging them to support House Bill 377 and Earned Income Credit legislation. Please contact your state representative by the close of business on Tuesday, November 13.

Access the LAMPa website at http://www.lamp.org. On the homepage, look for the box, “Find Your Elected Officals.” Enter your zip code and click “Find.” Click on the “State” tab. (In many locations, you will need the Zip+4 code to access the information. If you don’t know it, click on the button “Look up Zip+4” at the bottom of the open window.)

**Please file a post-advocacy action report with the LAMPa office at lampa@lamp.org, including a summary of any advocacy you do on this issue.**

Talking Points:

The proposed Pennsylvania EIC is based on the highly successful and time-tested federal EIC.

The Pennsylvania EIC is refundable. This means that if the credit is larger than the tax due, the taxpayer receives the difference back.

The proposed EIC does not replace the popular Tax Forgiveness plan. A taxpayer may take the Pennsylvania EIC or the Tax Forgiveness, whichever is larger, but not both.

The Pennsylvania EIC would be most beneficial to families with children earning incomes less than $25,000.

To be eligible, taxpayers must receive the federal EIC. In 2005 over 765,000 Pennsylvanians received the federal EIC.

In Pennsylvania, these eligible taxpayers could receive a credit equal to 30% of their federal EIC to be used against Pennsylvania Personal Income Tax liabilities.

Background:

The federal EIC was created in 1976 under President Ford to offset the burden of payroll taxes for low-income working families and to provide work incentives, and has been expanded under presidents Reagan, Bush, Clinton and Bush. The EIC is the most effective anti-poverty program, lifting 2.4 million children and more working families out of poverty than any other program. It is particularly effective in moving non-working welfare recipients into the workforce and reducing welfare use. It increases employment and earning of low-income families with children, especially single-parent families, and effectively adds about $2.00 per hour to their earnings. Families use the EIC to pay for basic needs such as groceries and utility bills.

The Pennsylvania Tax Forgiveness program does deliver critical tax relief to families who need it. It eliminates or substantially reduces the Personal Income Tax owed by many low-income Pennsylvanians. However, the Tax Forgiveness program does not encourage work in the way the EIC does, as none of the income on which tax is forgiven is required to come from work. The EIC, on the other hand, only includes tax liability from earned income. If enacted, the PA-EIC would be the better option for many lower-income working families.

ELCA Policy Base:

Why This Issue is Important to Lutherans...

“Poverty is a problem of the whole human community, not only of those who are poor and vulnerable... In light of this reality, we commit ourselves as a church and urge members to give more to relieve conditions of poverty, and invest more in initiatives to reduce poverty...[Moreover], we call for tax credits and other means of supplementing the insufficient income of low-paid workers in order to move them out of poverty.” ELCA Social Statement on Economic Life...Sufficient, Sustainable Livelihood for All (1999)

Sources: Pennsylvania Budget and Policy Center