Missouri Earned Income Tax Credit Helps Our Working Families

by Hart Nelson | Feb 05, 2016

The Earned Income Tax Credit is designed to assist our most economically disadvantaged working families by helping them break the cycle of poverty.  It targets low-income families and incentivizes people to work, which is the key to economic mobility. Studies show those without jobs are four times more likely to be in poverty than those who are employed.  A Missouri Earned Income Tax Credit (EITC), based on the existing federal credit, is at its core a tax cut that provides targeted assistance to an estimated 500,000 low-income working taxpayers all across our state by increasing their take-home pay without increasing our region’s cost of living.

The St. Louis Regional Chamber commends the leaders in the Missouri General Assembly for sponsoring legislation that will create a Missouri Earned Income Tax Credit.  Representative Mike Kelley is sponsoring House Bill 1605 and Senator Eric Schmitt introduced complementary Senate Bill 1018, which propose a 20% nonrefundable Missouri Earned Income Tax Credit modeled on the federal EITC.   Rep. Jeremy LaFaver filed House Bill 2154 proposing a 5% refundable EITC.  These leaders understand that Missouri needs to act now to help working taxpayers with low to moderate incomes at a time when many Missourians are struggling to make ends meet. 

Policymakers across the country have recognized the benefit of state EITCs. Twenty-seven states, including five of Missouri’s immediate neighbors, already have state EITCs.  Support at the federal level has been broadly bipartisan--Speaker Paul Ryan, President Ronald Reagan and President Obama are among those who have extended and expanded the program because it is effective and encourages work.

A major benefit of the EITC is that lower-income workers generally spend the credit immediately on goods and services, thus putting money back into the local economy.  EITCs allow working families to pay for basic necessities such as childcare, utilities and transportation out of their own wages, which keeps them at work rather than having to rely on public benefits. They are also designed to encourage families at the lower end of the wage scale to work more hours. Full-time work experience often translates into better job opportunities and a higher wage over time. According to the Center on Budget and Policy Priorities, three out of five filers who receive the credit use it just temporarily — one or two years at a time.

We believe public policies should encourage and incentivize employment, self-reliance and educational attainment to achieve income growth and reduce long-term dependency on government aid.  A Missouri Earned Income Tax Credit would accomplish these goals, and the examples in our neighboring states gives us certainty that the credit will target those it is intended to help.  We encourage our members, investors and partners to urge our representatives in the General Assembly to pass these bills without delay.