Earned Income Tax Credit offers statewide method to address poverty, inequality
University of Chicago economist Allen Sanderson and Chicago Alderman Ameya Pawar examined Universal Basic Income and the Earned Income Tax Credit in a debate last year. (One Illinois/Ted Cox)
By Ted Cox
A Chicago task force on working families urges expansion of the Illinois Earned Income Tax Credit to address poverty and equality statewide.
The Resilience Family Task Force issued a report Thursday, “Big Shoulders, Bold Solutions: Economic Security for Chicagoans,” that also suggests “cash-transfer solutions” statewide to lift families out of poverty and reverse income inequality.
The task force was formed last year by Chicago Mayor Rahm Emanuel after Alderman Ameya Pwar proposed a pilot program on Universal Basic Income that would conceivably provide $500 a month to 1,000 designated families. Pawar, who is also founder and president of One Illinois, headed the task force along with Tom Balanoff of the Service Employees International Union Local 1 and Celena Roldan of the American Red Cross. Sol Flores was also a member of the task force, and has since been appointed as a deputy governor by Gov. J.B. Pritzker overseeing state human-service agencies.
The report points out that “people are struggling,” statewide and in Chicago, where a quarter of renters pay more than half their income for rent — especially problematic for working families on minimum wage. Child care and home caregivers also present challenges for families on low incomes.
In addition to exploring the basic-income stipend, the report also looked at the Earned income Tax Credit, stating: “A bold city and state EITC would provide more reliable support to more people. The state has an EITC to build on and there are opportunities for the city to explore creation of a city EITC.”
A debate last year on the minimum wage between Pawar and conservative University of Chicago economist Allen Sanderson found Sanderson saying, “Given the choice between giving people things and giving people money, economists would rather give them money,” and pointing out that the EITC actually grew out of an original proposal on basic income from U. of C. economist Milton Friedman in the ‘70s. So the two concepts are related, with EITC serving as a “negative income tax,” returning money to workers below a certain earnings level.
The task-force report suggests on EITC: “We should bring more workers into the fold, particularly unpaid caregivers as well as people with middle-class incomes and students. We should increase the minimum credit for most recipients to give a more substantive benefit; spread out the payments over the year so the income is predictable; and create an automatic filing option.”
It points out that the money typically goes straight back into the economy, as working families are apt to spend it, and that the exponential impact on sales taxes and the like means that the EITC largely pays for itself, with every dollar in EITC payments eventually costing the government just 13 cents.
The task force recommends broadening eligibility and increasing benefits, and proposes that Chicago create its own EITC. Also, where the EITC now basically amounts to a tax rebate on returns when annual taxes are filed, it should also have streamlined enrollment, again depending on income and wages, and be delivered at regular intervals throughout the year.
According to the report: “Nearly 1 million Illinois households received the federal EITC in 2018. The average amount of the federal credit for Illinoisans was $2,517 per household, bringing $2.3 billion back into Illinois.”
The report says the timing is right with Gov. Pritzker taking office as Emanuel ends his two-term tenure, concluding: “We are in a unique political moment in time with a new governor of Illinois and soon a new mayor of Chicago. The time is ripe for these new leaders to translate these solutions to action. There is ample opportunity for the new leaders to put their imprint on the shape these solutions take and how they become a reality.”
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February 12, 2019 at 11:52AM