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Warren Buffett: Stop Blaming The Rich For Income Inequality. If You Really Want To Help, Do This

Posted by dbrown on 07/06/2015

Tags: EITC, Wealth, assets, income, Inequality

The world’s third-richest man weighed in on the national debate over rising levels of income disparity in the United States yesterday, saying that while the gaps between the country’s haves and have nots are definitely increasing, it is not the fault of those at the top. Nor will it be solved by traditional methods, like improving education or hiking the minimum wage. His solution: Increase access to the Earned Income Tax Credit.

“No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich,” Buffett, whose net worth we clock in at $71.3 billion, wrote in a Wall Street Journal opinion piece published late yesterday. “Nor are the rich undeserving. Most of them have contributed brilliant innovations or managerial expertise to America’s well-being. We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like. Instead, this widening gap is an inevitable consequence of an advanced market-based economy.”

That’s not to say the gap isn’t growing. Citing data from The Forbes 400 list of the richest Americans, he said that the total net worth of those on the list in 1982, the first year the list was compiled, was $93 billion. In 2014, that number was $2.3 trillion, up 2,400%. At the same time, median household income in the United States rose only about 180%, he said.

Improving education, won’t work fast enough, or go far enough, he said. And fighting to raise the minimum wage—currently in vogue among many on the left—won’t bridge the gap either, he says, and may actually backfire by hurting employment. “The better answer,” he said, is an expansion of the earned income tax credit, a federal tax credit targeted at working class Americans which gives them a credit starting with the first dollar they earn and rises until it hits a ceiling, then phases out from there.

According to the Center on Budget and Policy Priorities, more than 27 million taxpayers got the ETIC in 2013 and in the 2012 tax year, the average EITC was $2,982 for a family with children.

“There is no disincentive effect: A gain in wages always produces a gain in overall income,” writes Buffett. “The process is simple: You file a tax return, and the government sends you a check. In essence, the EITC rewards work and provides an incentive for workers to improve their skills. Equally important, it does not distort market forces, thereby maximizing employment.

That distortion is the main criticism of opponents of raising the minimum wage. Arbitrarily increasing the amount employers are required to pay workers, as cities like Seattle, and most recently Los Angeles have done, is a disincentive to hiring or retaining workers, especially those at the lower end of the economic ladder who most need a job.

“I may wish to have all jobs pay at least $15 an hour,” writes Buffett. “But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty.”

Before you agree, its worth noting that not everyone is a fan of the plan. My colleague Kelly Phillips Erb, who knows a fair amount about the tax code, cautions that the EITC is filled with errors and fraud. She cites two government studies which find an “improper payment error rate” of somewhere around 25 percent–that’s one in four filings–amounting to more than $13 billion “paid out in error,” she says.

Beyond that, she says, it is simply another attempt to use taxes to shape behavior. And that’s not what taxes are for. “If folks need a hand up, we should make help available,” she wrote earlier this month when Buffett floated the idea. “I just don’t think that our Tax Code is the right mechanism for doing it (anymore than I think we should use taxes to encourage home ownership or discourage drinking big sodas).”

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Working dads need a hand up too

Posted by rflum on 06/19/2015

Tags: EITC, tax credits, working families

This Father’s Day, Rhode Island lawmakers are poised to give 27,000 Rhode Island dads a gift more meaningful than the typical father’s day tie or “World’s Greatest Dad” coffee mug.

Tuesday evening, the house approved an increase to the state’s Earned Income Tax Credit (EITC), increasing the credit from 10 percent to 12.5 percent, as part of the state budget. This means $6 million dollars in the pockets of working families. The Senate is expected to pass the budget next week.

While this is an important first step in reducing income inequality for our state’s working families, more needs to be done next year so that single or married fathers can better provide for their kids. Governor Raimondo’s original proposal called for increasing the EITC to 15 percent over the next two years. Our neighboring states have also proposed more robust increases--Connecticut’s EITC is at 27.5 percent and Massachusetts has proposed to get to a 22.5 percent credit —both states recognize the importance of making work pay, especially in this high-cost region.

By making a significant investment to the EITC next year, lawmakers can help Rhode Island dads help pay for the very things that allow them to work, like tending to car repairs, covering child care expenses, or buying a new uniform. This spending happens right here in our local economy, and provides a boost for our still struggling businesses.

Research on the benefits of the EITC found that filers work more, earn more, and are less likely to need to rely on welfare. Evidence also shows that the EITC has long-term benefits for s kids. The children of parents who received the EITC are healthier and do better in school. Larger tax refunds also boost college enrollment by making college more affordable for low- and modest-income households. And some of the best news is that the boost in work effort and earnings extends into the next generation, with more work and higher earnings for children raised by parents who benefit from the added income the tax credits provide.

State Earned Income Tax Credits also help to make sure that the state tax code treats low-wage families more fairly. In Rhode Island, the lowest-income households contribute almost twice as much of their income towards state and local taxes as the wealthiest and our state now has the unfortunate distinction of having the 5th highest taxes on low-income households in the country. Low-wage dads pay a larger share of their incomes in local and state taxes than affluent households do in most states. Increasing our state EITC is one of the best ways to provide targeted relief to those who need it most.

This Father’s Day we honor our working dads, not by giving them another tie or coffee mug, but by giving them the means to help their family. Rhode Island lawmakers took an important first step by increasing the EITC this year. Let’s stay on the right track and do more next year so that working dads can build a brighter future for themselves and their children.

Kate Brewster is executive director of the Economic Progress Institute, a research and advocacy organization.

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A Real Mother’s Day Gift for Working Moms

Posted by rflum on 05/11/2015

Tags: EITC, tax credits, working families

Submitted to local papers in Rhode Island

This Mother’s Day lawmakers can give 53,000 Rhode Island mothers a gift that will be more meaningful than flowers or chocolates.

It is the gift of an increase in the state’s Earned Income Tax Credit (EITC).

Working moms are never off the clock. From packing lunches in the morning to reading stories before bedtime, moms put in a lot more than a full day’s work. Governor Raimondo understands that, and she knows that lots of moms are working full-time in low-wage jobs that make it difficult to support their families. That is why the Governor’s budget includes an increase in the state EITC that would allow working moms to keep more of their paycheck.

Boosting family income means that moms are better able to pay for the very things that allow them to work, like tending to car repairs, covering child care expenses, or buying a new uniform. This spending happens right here in our local economy, which is important for our still struggling businesses.

Significant research on the benefits of the EITC found that filers work more, earn more, and are less likely to need to rely on welfare. Evidence also shows that the EITC has long-term benefits for moms and their kids. The children of parents who received the EITC are healthier and do better in school. Larger tax refunds also boost college enrollment by making college more affordable for low- and modest-income households. And some of the best news is that the boost in work effort and earnings extends into the next generation, with more work and higher earnings for children raised by moms who benefit from the added income the tax credits provide.

State Earned Income Tax Credits also help to make sure that the state tax code treats low-wage mothers more fairly. In Rhode Island, the lowest-income households contribute almost twice as much of their income towards state and local taxes as the wealthiest and our state now has the unfortunate distinction of having the 5th highest taxes on low-income households in the country. Increasing our state EITC is one of the best ways to provide targeted relief to those who need it most.

This Mother’s Day let’s honor our working moms in a meaningful way by putting more money in their pockets, helping them build a brighter future for themselves and their children.

Kate Brewster is executive director of the Economic Progress Institute, a research and advocacy organization.

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Leaving Money on the Table

Posted by cspohrer on 03/23/2015

Tags: Virginia, EITC, refundable

By Mitchell Cole, Policy Analyst, The Commonwealth Institute for Fiscal Analysis

Every year at tax time, Virginia’s Earned Income Credit (EIC) helps hundreds of thousands of working families reduce their taxes. But for all the good that it does, the state’s credit is missing a critical piece that forces families across the state to leave some of their credit — and their cash — on the table.

Unlike with the federal credit, which gives taxpayers the full value, taxpayers in Virginia who claim the state credit can’t get back what they don’t use.

That means families can use the Virginia EIC to reduce the income tax they owe, but it doesn’t help them deal with the other state and local taxes they pay. In fact, they often pay more of their income in state and local taxes than better-off families. That’s because sales and property taxes weigh more heavily on low-income families. So for many families, just reducing their state incomes taxes doesn’t go far enough.

For example, a single parent of two earning $15,000 would get a credit of $1,092. However, that’s $761 more than the amount of income tax she owes. So while her income tax gets reduced to zero, she still must leave most of her credit on the table. That’s money that could be used to help pay a utility bill, buy food for the family, or pay for a car repair.

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There’s an easy fix to this problem: Lawmakers can improve the state’s EIC by making it refundable, helping thousands of low-income, working families by giving them the full value they’ve earned. Even just making the EIC partially refundable would be a step in the right direction. But so far, that’s too much for Virginia’s lawmakers, who voted down proposals to do just that during the last session.

So as families of all income levels file their taxes this year, many of those at the lowest end of the scale will be denied the tax credits that they’ve worked hard to earn. And that just doesn’t seem fair.

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Bill Filing for Financial Security in Mass

Posted by mmiley on 04/08/2013

Tags: Massachusetts, EITC, Asset Limits, Financial Security, asset development, Midas Collaborative

Following the release of the CFED's Assets & Opportunity Scorecard in Massachusetts, the Midas network was busy with bill filing at the beginning of our 2 year session. The report on Massachusetts shows that despite having very high average incomes, relative to other states, many Mass households are financially fragile.

Though 12% of Mass residents are considered below poverty-which is likely an underestimate in this high-cost state- 37% of Mass households are one emergency away from financial disaster and 47% have sub-prime credit scores. Th CFED's national report was covered on national media, including NPR, Huffington Post, and the Twitterverse, and the Massachusetts report was covered locally in CommonWealth Magazine, on WBZ, BlueMassGroup, Boston Business Journal, and MassLive.

Financial security bills filed:

An Act Removing Barriers to Financial Stability and Asset Development for Low-Moderate Income Residents will increase asset limits for people on public assistance, allowing them to save money in preparation for making a transition from public benefits. It responds to the situation wherein people are trapped on public benefits because they cannot save or earn enough to substitute them, causing the so-called "cliff effect" (loss of stability) that results when transitioning off of benefits. (HD 1270/SD604) {Sen Eldridge/Rep Forry}

Pathways for Family Economic Self-Sufficiency would create some pilot education and training programs for low-income families to be administered by the Commonwealth Corporation. Not an asset bill, but it does support financial mobility and is strongly supported by Midas members, ABCD and Crittenton Women's Union.(HD872/SD501) {Sen Donoghue/Rep Khan}

A Bill to Increase the State Earned Income Tax Credit (EITC) from 15% to 20% of the federal EITC. It adds to what is considered the most effective anti-poverty program in the country. (SD883) {Sen Creme}

An Act Relative to Establishing a Disaster Emergency Tax Credit allows working poor to increase their tax refunds by applying the Earned Income Tax Credit thresholds to replace items ruined in disasters declared by president. For people who typically do not own homes and do not qualify for Small Business Administration loans under FEMA and are most economically vulnerable because of displacement in housing and jobs. An asset-protection effort. (HD3047) {Rep Fox}

We will support later efforts to increase financial education and savings during the budget process in the coming weeks.

Thank you to those who made calls to support financial security!

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Audio Press Conference on PA Scorecard

Posted by hwinokur on 04/02/2013

Tags: EITC, VITA, Pennsylvania, PA

4/1/13: Pennsylvania’s Lead Local Organizations, including the Montgomery County Asset Building Coalition, held an audio press conference: Fool for Finance? Pennsylvania Needs to Improve Asset Building, Debt Reduction and Business Opportunities. The call focused on some of Pennsylvania’s results from the CFED Scorecard, and recommendations for amelioration.

The Montgomery County Asset Building Coalition coordinator, Harriet Winokur, spoke about the federal Earned Income Tax Credit (EITC) as an anti-poverty and asset building opportunity. She advocated for the creation of a PA state EITC to provide additional benefits to PA’s low income residents, and to the state economy.

Ms. Winokur also spoke about the Volunteer Income Tax Assistance (VITA) program and its importance for low-to-moderate income residents and their communities. She emphasized the necessity of additional support for VITA from all levels of government.

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Raise the State EITC to offset new gas tax

Posted by rmckinney on 03/26/2013

Tags: EITC, tax

The House of Delegates has passed a transportation package that includes raising the gas tax. The increase will impact families making less than $25,000 by almost $100 per year once it is fully phased in. This does not include the potential impact on the increased costs of goods and services due to higher gas costs. Increasing the Maryland Earned Income Tax Credit (EITC) would give families the ability to cover price increases.

Please call your state senator today to show your support for SB703.

This year more than ever, it is critical that Maryland increase the refundable EIC to offset the negative individual economic impacts on low- and moderate-income workers of the increases in the gas tax. Having a stable and livable income enables these workers to maintain a foothold in the world of work, meet the needs of their families, and begin to build a more secure financial future.

In 2012, over 395,000 Marylanders claimed $861 million in federal and state Earned Income Tax Credits. The average taxpayer received a refund of $2,180, over 12% of their annual income (average $17,000). Many families use their refunds for rent, utilities, food, and savings. Many also use their refund to purchase a car, which enables them to access higher-paying jobs.

  • The EITC as a critical resource for helping families build a foundation for family economic success. This bill would raise the MD EITC from 25% to 30% of the federal credit.
  • The EITC rewards work by helping working families get onto the first rung of the economic ladder.
  • The EITC provides income support to help low-wage workers get by on entry-level jobs.
  • The EITC gives low- and moderate-income workers the opportunity to catch up on their debts and bills, and, in some cases, even begin to save through access to financial counseling and low-cost financial services.

The Senate needs to offset the cost of an increased gas tax by raising the Earned Income Tax Credit (SB 703). Call or email your state senator today!

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RealSense Prosperity Campaign marks 10th year of growth in free tax preparation services

Posted by jwinkler on 02/20/2013

Tags: free tax preparation, northeast florida, realsense, real$ense, fscj kent campus, united way of northeast florida, earned income tax credit, EITC

"For the third year in a row, Jacksonville resident John Kelso got his tax return prepared free by the Real Sense Prosperity Campaign.

Kelso had used national tax preparation companies in the past. But he is working two part-time jobs to make ends meet, so he said being able to file his return at no cost makes a big difference to him.

“The cost of gas has gotten so expensive that every penny counts,” he said.

Heading into its 10th year, the nonprofit Real Sense Prosperity Campaign has become a go-to site for tax preparation for thousands of Northeast Florida residents like Kelso.

Since 2003, Real Sense has coordinated hundreds of volunteer tax preparers working at sites in Duval, St. Johns, Clay, Nassau, Baker, Putnam and Flagler counties.

It’s posted a sharp increase in clients, going from 1,563 returns its first year to 16,629 returns last year.

“We really try to target our message to hardworking, low-income folks who have simple tax returns and don’t need to be paying somebody to do their tax returns,” said Jeff Winkler, director of Real Sense.

The campaign is aimed in part at people who qualify for the Earned Income Tax Credit, which can result in refunds at tax time. Last year, Real Sense prepared 3,802 tax returns for people able to claim the Earned Income Tax Credit. Those returns generated almost $6.3 million in refunds for those taxpayers.

Bonnie Moore, who oversees the Real Sense site at the Kent Campus of Florida State College at Jacksonville, said even when clients have been able to find jobs, they are struggling financially. Sometimes, they need to work two or more jobs to get by, she said.

“I haven’t seen the economy rebound the way we’re all hoping for — not for the bulk of the clients we’re seeing,” she said.

Real Sense is affiliated with the United Way and draws support from an assortment of government, business and philanthropic sources.

The Jessie Ball duPont Fund is providing $200,000 for this year’s campaign, accounting for about one-third of the budget. The city of Jacksonville is providing a $61,573 grant.

Real Sense also has year-round programs with financial education classes and counseling. A three-year, $300,000 grant by Wells Fargo enabled the opening of a financial service center at the bank’s branch in the Springfield neighborhood."

david.bauerlein@jacksonville.com, (904) 359-4581

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Maryland CASH passes suite of asset building/protection policies

Posted by rmckinney on 04/11/2012

Tags: EITC, prize-linked savings

Maryland CASH Campaign advocated for 5 key asset building and asset protection bills this session.

Making Work Pay

Maryland CASH supported a 5% increase in the state Earned Income Credit to offset regressive tax and fee increases. HB 331/SB 943 were both heard in their respective houses. The Senate included a 5% increase in the EITC, spread over 5 years, in their approved budget plan. The House budget did not include the EITC, but did not impact households making less than $100,000. By the last day of the session, the House and Senate could not pass a comprehensive budget and were forced to pass the “doomsday budget.” Since the 2 houses could not agree, the Governor will be calling a special session to stave off the impact of the $500 million of cuts, set to begin on July 1, 2012. Maryland CASH will monitor the special session to make sure that low-moderate income taxpayers are not negatively impacted.

Making Savings Fun

Maryland CASH passed a bill in 2010 to allow credit unions to offer savings promotions raffles, also called prize-linked savings. A last-minute amendment from the banking industry delayed implementation until banks could participate under Federal law. Maryland CASH passed HB 786/SB 1053 to broaden the program to banks and credit unions, while balancing the prohibitions on banks to offer raffles at the federal level. Maryland CASH worked closely with the banking industry to craft a bill that works for both banks and credit unions. The law goes into effect on June 1, 2012.

Protecting Credit and Homeownership

Maryland CASH pushed HB 555/SB 295 to allow parents/guardians to freeze a credit report for minors or other protected persons. This is the first law of its kind in the country. Currently, a credit reporting agency cannot freeze a report for a minor, since they do not knowingly create reports for minors under the age of 18. This bill helps to prevent identity theft and allows minors/protected persons to better manage their own credit.

HB 600/SB 580 prevents cancelled debt due to a mortgage foreclosure from being considered as taxable income. Since 2007, the federal government has exempted this debt from income, but this provision is set to expire on December 31, 2012. These bills will protect homeowners from state tax debt if Congress fails to act. Given the recent Attorney General settlement with mortgage lenders, there is great concern that homeowners may not access the benefits/programs available if they think it could be taxable.

Sustaining the Asset Building Field

Maryland CASH pushed HB 515/SB 476, which creates a new Financial Education and Capability Commission. This standing commission will include various state agencies, non-profits, and funders who will monitor financial education and asset building activities and make policy recommendations. This bill builds off of the work of the Financial Literacy Task Force, which ran from 2008-2010. In order to balance out a costly fiscal note, an amendment passed to have Maryland CASH staff the commission. Maryland CASH will be the first non-governmental agency to staff a legislative commission in the state’s history.

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Maryland CASH pushes suite of asset building policies

Posted by rmckinney on 03/19/2012

Tags: EITC

Maryland CASH Campaign is pushing 5 key asset building and asset protection bills this session. With just 3 weeks remaining in the session, all bills are showing strong support and movement. Sign up for action alerts to get the latest information!

Making Work Pay

Maryland CASH supports a 5% increase in the state Earned Income Credit to offset regressive tax and fee increases. HB 331/SB 943 have both been heard in their respective houses. The Senate Budget and Taxation Committee included the 5% increase, spread over 5 years, in their budget report to the full Senate. The full Senate adopted the EITC increase. The House is currently deliberating on the Senate's plan.

Making Savings Fun

Maryland CASH passed a bill in 2010 to allow credit unions to offer savings promotions raffles, also called prize-linked savings. Maryland CASH is pushing HB 786/SB 1053 to broaden the program to banks and credit unions, while balancing the prohibitions on banks to offer raffles at the federal level. The bill has been heard in the House.

Protecting Credit and Homeownership

Maryland CASH is supporting HB 555/SB 295 to allow parents/guardians to freeze a credit report for minors or other protected persons. If passed, this would be the first law of its kind in the country. Currently, a credit reporting agency cannot freeze a report for a minor as they do not knowingly create reports for minors under the age of 18. This bill helps to prevent identity theft and allows minors/protected persons to better manage their own credit. The Senate passed the bill unanimously and is awaiting a vote in the House.

HB 600/SB 580 prevents cancelled debt due to a mortgage foreclosure from being considered as taxable income. Since 2007, the federal government has exempted this debt from income, but this provision is set to expire on December 31, 2012. These bills will protect homeowners from state tax debt if Congress fails to act. Given the recent Attorney General settlement with mortgage lenders, there is great concern that homeowners may not access the benefits/programs available if they think it could be taxable. Both bills have been heard.

Sustaining the Asset Building Field

Maryland CASH is supporting HB 515/SB 476, which creates a new Financial Education and Capability Commission. This standing commission would include various state agencies, non-profits, and funders who would come together to monitor financial education and asset building activities and make policy recommendations. This bill builds off of the work of the Financial Literacy Task Force, which ran from 2008-2010. In order to balance out a costly fiscal note, an amendment passed to have Maryland CASH staff the commission. The bill has passed the Senate and is awaiting a vote in the House.

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