Invest in Utah Workers

19 February 2013 Written by  

Poverty in Utah has been on the rise in the past several years. In a state that values the pioneer spirit of self-sufficiency and hard work in the face of adversity, the desire to exit poverty is strong. And yet, poverty persists among many workers in Utah despite unemployment declining and workers returning to jobs. Wages have not kept up with inflation and many newly created jobs are not providing salaries sufficient to meet the basic economic needs of Utah families. In those homes where basic economic needs can’t be met, children often suffer.

Unfortunately, the Utah tax system is playing a role in establishing obstacles to economic security for these same vulnerable Utah families. A recent study demonstrated that taxpayers earning only $20,000 per year find themselves paying nearly twice as much of their income to taxes as those in the highest 1 percent of income earners. That’s just not fair.

The state Legislature has an opportunity to address the imbalance in the state tax system for those working taxpayers struggling to make ends meet for their families. This week, the House Revenue and Taxation Committee will consider HB 197 (Hutchings-R), a state Earned Income Tax Credit (EITC) for low- and moderate-income working, taxpayers. The EITC is an investment, particularly in the working poor, not through a government handout but through a policy with proven results for working families. President Ronald Reagan called the EITC a “sweeping victory for fairness” and “perhaps the biggest antipoverty program in our history.”

The proposed state EITC is modeled after and linked to the federal Earned Income Tax Credit. The federal EITC is an income tax credit that has been providing low- and moderate- income working families with the boost they so badly need when hours are cut and incomes are eroding. The state EITC would provide a bonus to those working taxpayers who receive the federal EITC, recognizing the valuable role they play in Utah’s re-energized economy.

In 2011, nearly 1 in 5 of Utah taxpayers received the federal EITC. According to the federal Internal Revenue Service (IRS), even more Utahns qualify for the EITC but fail to apply for the credit. Despite the fact that not all who are eligible receive the credit, it put back into the pockets of these working taxpayers $412 million which was quickly spent and returned to Utah’s economy. Most significantly, the EITC has lifted 6.1 million people, 3.1 million of whom are children (33,500 kids in Utah), out of poverty.

Although substantially smaller, HB 197 would add to that credit by providing each taxpayer who qualifies, 5 percent of the federal EITC. Many low-income workers who are only an illness, a layoff or even a car repair away from financial devastation, will be aided by even the small bonus HB 197 would provide.

Among those a state EITC would help are our military families. Many members of the military would benefit from the state EITC. Returning veterans also rely on it to supplement their wages as they make their way back into civilian workforce.

Today, nearly 1 in 6 Utah children lives in poverty. A state EITC would help keep them out of poverty, and live in families where basic needs can be met. Adopting HB 197 will not only help those Utahns going to work every day to support themselves and their children but is a smart investment in Utah’s economy.District EITC factsheet

Sara Face Shot BetterSara Gunderson, Office Manager and Executive Assistant, joined the organization in 2007. She has extensive administrative experience, including more than eight years in development at the University of Utah Health Sciences Center. Sara received her BS in Psychology at the University of Utah with a coursework emphasis in infant and child development.