Fahy Releases Comprehensive Plan for an Expanded Earned Income Tax Credit (EITC)Program in NYS
Plan will Combat Growing Income Inequality, by Increasing the Value of NY’s EITC Income Credit, Expanding Eligibility to Young Adult & Immigrant Workers, Doubling Phase-Out Rates, and Creating Flexibility Through Advance Payments
ALBANY, N.Y. — Assemblymember Patricia Fahy (D — Albany) announced today that she is introducing comprehensive legislation to significantly increase New York’s Earned Income Tax Credit (EITC) by growing the value of the state credit from 30 to 40-percent of the federal credit, expanding the pool of eligible workers to young adult and immigrant workers, and creating flexibility in payments by newly authorizing quarterly payments for eligible New Yorkers. For the first time, all income-eligible workers, including those under age 25 who have no children, and those who do not have a social security number but pay taxes, would be eligible for the state EITC. Income inequality is one of the most pressing issues of our time — and getting worse. The wealth gap between the richest and poorer families has more than doubled since 1989, according to the Pew Research Center.
In the United States, 39% of working people whose household income was less than $40,000, lost their jobs or were furloughed in March 2020 due to the COVID-19 pandemic, according to a Federal Reserve survey — compared 13% of people in households with an income above $100,000. Meanwhile, the ultra-wealthy have become $565 billion richer since March 18, while over 40 million Americans have filed for unemployment as of June 1st. Low-wage workers under 35 have borne the brunt of the economy’s slowdown during the pandemic, and with the U.S. economy officially in recession, reducing the wealth gap needs to be a major part of our economic recovery.
Research has repeatedly cited EITC as one of the single most effective programs for lifting millions of low-income households out of poverty each year. The Federal EITC alone lifted approximately 5.6 million Americans out of poverty in 2018, including 3 million children, and is more effective at encouraging long-term employment than comparable social programs, as it rewards those who earn more income over time until a recipient reaches the maximum benefit limit.
Critically, this Expanded-EITC raises the value of New York’s credit from 30 to 35-percent of the federal EITC in 2020, and to 40-percent of the federal EITC in 2021 and beyond, while doubling the phase-out rate from 7 to 15-percent for single or married households with 1 or fewer children, increasing maximum credit amounts. Most notably, a childless single adult would see the maximum tax credit increased from $464 right now, to $1,587 (see Figure 1). Additionally, the phase-out start point for New York’s EITC for childless adults would rise from $8,790 to $24,960 for single parents and from $14,680 to $29,960 for joint filers, expanding the number of households eligible for the credit, reflecting the need to address growing inflation and income inequality in the economy.
Further expanding the list of those eligible to receive the credit, the proposal lowers the age requirement for a single childless adult from 18 to 25, makes immigrant workers who hold a Tax Identification Number (TIN) eligible, and authorizes advance payments in the form of installments. The modern U.S. economy is driven primarily by consumer spending; accounting for 70% of the United States’ total economic activity every year. However, what is now record-high income inequality has gradually reduced consumer spending for lower and middle-class Americans in terms of share of annual income, as more households see the cost of living rise, and incomes stagnate, exacerbated by an economic recovery in 2010 that benefitted the wealthiest Americans in the more recent global COVID-19 pandemic.
“An Expanded-EITC in New York will direct critically needed income into the pockets of working New Yorkers to help jumpstart the economy and aggressively combat income inequality in the United States which has doubled in the last 30 years alone,” said Assemblymember Patricia Fahy (D — Albany). “Low-income families, especially young adults and people of color, have been the hardest hit by the Covid-19 pandemic as well as the economic upheaval and face record-high levels of unemployment and wealth disparity, which demands. bold action and a transformative investment in our workforce. An Expanded-EITC in New York will lift thousands of New Yorkers out of poverty each year while incentivizing work while boosting local economies. Now more than ever, workers need support as the economy slowly but surely recovers.”
“As income inequality in New York and the United States continues to grow unabated, we have to ensure that our economic recovery starts from the ‘bottom-up’ and that working and middle-class families aren’t left behind like they were in 2010,” said Assemblymember Tremaine Wright (D — Brooklyn), Chairperson of the Black, Puerto Rican, Hispanic, And Asian Caucus. “I applaud Assemblymember Fahy’s proposal to transform New York’s earned income tax credit, providing needed capital directly into the pockets of families and individuals who need it most as the economy begins to recover from the COVID-19 pandemic.”
“Now more than ever, it is essential that New York families have the support they need in order for them to continue to thrive in our state,” said Assemblywoman Ellen C. Jaffee (D — Rockland County), Chair of the Assembly Committee on Children and Families. “By reforming the EITC tax credit, working parents can continue supporting their families, while having financial support; something our families need as our economy recovers from the effects of COVID-19.”
“I am proud to join my colleagues in recognizing the needs of those families and individuals that are economically disadvantaged,” said Assemblymember Harry Bronson (D — Rochester), Chair of the Assembly Committee on Aging. “This legislation will offer a solid start to building a better life. I look forward to working with my colleagues to pass this important piece of legislation and help those families that need us most.”
“I commend Assemblymember Fahy for introducing this sensible and critical legislation at a time when New Yorkers need it most,” said Assemblyman Andrew Hevesi, Chair of the Assembly Committee on Social Services. “Increasing the earned income tax credit will provide working families with much needed direct financial aid. I look forward to joining the fight to pass this legislation in Albany.”
“The Earned Income Tax Credit (EITC) raises incomes of low and middle-income working New Yorkers, making their paychecks stretch farther, and has been linked to significant short- and long-term improved outcomes for children and families,” said Kate Breslin, President and CEO of the Schuyler Center for Analysis and Advocacy. “And, the credit encourages and rewards work because it phases as income increases. As an organization dedicated to strengthening families, reducing poverty, and eradicating racial inequities, we thank Assemblymember Fahy for leading the charge on this bill and urge its swift passage. It is exactly the kind of bold policy initiative New York must undertake for working New Yorkers, hit hard by COVID-19 and its economic fallout, to regain their financial footing.”
“Assemblymember Fahy’s sensible updates to New York’s Earned Income Tax Credit means more New Yorkers can keep a larger share of their earned income to pay monthly bills, cover unexpected expenses, or purchase necessities. Workers who earn low wages have taken the most significant financial hit from COVID-19, and Assemblymember Fahy’s proposal is welcome redress,” said Ron Deutsch, Executive Director of the Fiscal Policy Institute. “Too many New Yorkers struggled to make ends meet even before the pandemic which has only sharpened the need for Assemblymember Fahy’s bill. This legislation corrects long-standing inequities in our state tax policy, and we thank Assemblymember Fahy for helping everyday New Yorkers. We urge Assemblymember Fahy’s legislative colleagues and leadership to support this bill speedily.”
“Assemblymember Fahy’s bill to expand and enhance the Earned Income Tax Credit is well timed and critical to the financial recovery of the households hardest hit by COVID 19,” said Brenda Episcopo, President & CEO, United Way of New York State. “Before the onset of the pandemic, 45% of households in NY could not afford a basic household survival budget, as illuminated by the United Way ALICE Report (Asset Limited, Income Constrained, Employed). Further, the households with the highest percentage Below the ALICE Threshold are those headed by individuals younger than age 25, Black and Hispanic households. The EITC expansion targets those households, to ensure we do not leave them behind in COVID response and recovery. This is an important step for our state.”
“The Earned Income Tax Credit policy has been the government’s most effective tool for lifting working families out of poverty,” said Peter Gannon, Executive Director, United Way of the Greater Capital Region. “As we recuperate from the financial impacts of the COVID-19 pandemic — extending these benefits to more working people who were disproportionately impacted by the crisis is a must.”