In my post, I talk a lot about ways to help businesses grow, and what I’m saying is that success starts with successful Pennsylvania families.
The link between family financial security and business prosperity is clear. When people have extra income, they often inject it into the economy. And that’s why my organization, the National Federation of Independent Businesses of Pennsylvania, supports the creation of a state earned income tax credit.
This refundable tax credit is exactly what the state needs right now to put taxpayers’ income back into the pockets of working households. One of the end results would be increased spending at businesses large and small, which would mean adding more people to the workforce and allowing employees to increase their hours. of work.
It’s not just businesses that benefit. The refundable earned income tax credit would help state and local governments emerge from the pandemic. When there is more financial stability in a household, communities decrease the need and cost of social services.
The federal government offers an earned income tax credit, and the idea of states doing the same is not new.
Unfortunately, Pennsylvania is behind many of its peers. Across the country, 30 states have passed a working income tax credit to support working families and help strengthen local economies.
Pennsylvania has a tax exemption program that has been in place for decades and provides some relief to Pennsylvania families each year. But many families in financial difficulty are not eligible for this tax exemption. An income tax credit program would solve this problem.
Research through the United Way of Pennsylvania shows that a state earned income tax credit could benefit 874,000 eligible households in our Commonwealth.
The study also found that a dollar of public funds used for a refundable tax credit will generate a return of $7 from additional state and local tax revenue, business income and reduced expenses. of public assistance.
The Pennsylvania National Federation of Independent Business is joining with the United Way of Pennsylvania, Pennsylvania Partnerships for Children and the AFL-CIO of Pennsylvania to support legislation to create a state earned income tax credit. Bills have been introduced in the State Senate by Senator Mario Scavello (Senate Bill 1082) and in the State House by Representative Martina White (Bill 2382).
The Pennsylvania National Federation of Independent Business also advocates reducing corporate net income taxes in the state, which would create a more competitive climate for job creation here in Pennsylvania. The legislator can combine its efforts and reduce employers’ taxes while allowing a refundable tax credit for working families.
When an earned income tax credit is combined with Pennsylvania’s current tax exemption program, 1 in 4 Pennsylvanians would receive some form of state income tax relief. And lower taxes mean more money in the pockets of hard-working residents.
Here’s what United Way research says about a state earned income tax credit:
— A 10% state earned income tax credit would generate annual benefits of at least $562 million for the Pennsylvania economy. With a 25% credit, the likely benefits total at least $1.2 billion.
— A 10% tax credit on earned income would avoid spending $176 million on personal services costs. At 25%, this human services cost avoidance is $213 million.
— At 10% of the federal benefit, nearly 716 000 households would receive an average benefit of $197 per year. A state refundable income tax credit equal to 25% of the federal benefit would help about 874,000 households with an average benefit of $594 per year.
Far too many Pennsylvanians are working two or three jobs these days and still not earning enough to pay their bills. A state earned income tax credit would provide relief to families, strengthen their financial security and boost local businesses. It’s a win-win scenario for our state, and lawmakers would be applauded for making it possible.
Greg Moreland is state director of the National Federation of Independent Businesses of Pennsylvania.