Make tax credits work for working families

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In an article on Medium.comMilwaukee County Executive Chris Abele, argues that this legislative session, legislators need to focus on supporting economic fairness by increasing the Earned Income Tax and Child Care Tax Credits for working families in Wisconsin.

While every major American metropolitan area struggles with income inequality, concentrated poverty, unequal incarceration rates, disparate health outcomes, and poor overall quality of life for African Americans, statistics demonstrate that socioeconomic racial disparities tend to be at their most extreme in Milwaukee.

The factors that contribute to this lack of economic opportunity — such as inequitable access to jobs and job training, education, affordable childcare and healthcare, and disparate treatment by our criminal justice system — are complicated and entrenched. Many rural communities around our state, often with growing immigrant populations, face similar barriers to growth.

There are no easy solutions to fighting systemic poverty.

However, history tells us we have at our disposal tried-and-true methods that can help level the playing field and give people who work hard and do the right thing a chance to climb the ladder of economic opportunity.

The Earned Income Tax Credit (EITC), a tax credit that helps families who work, but take home less than roughly $46,000 a year, is a critical tool in combating the poverty epidemic. The EITC has earned the popular support of officials from both political parties as well as the public. In the Tax Reform Act of 1986, President Ronald Reagan expanded the EITC because he understood its value in encouraging work and allowing wage earners at the bottom of the economic spectrum an opportunity to lift themselves up and escape a life of poverty.

Former Republican congressman and Housing and Urban Development Secretary Jack Kemp’s support for the EITC was even more pronounced. In a 2008 editorial for the Spotlight on Poverty and Opportunity, Kemp, along with former Democratic Senate Majority Leader George Mitchell, argued that streamlining, broadening, and expanding the EITC was “essential” in helping the millions of full-time, year-round workers who live in poverty.

Kemp and Mitchell also made the case that “more needs to be done to expand access to capital, access to quality education and creating greater access to job opportunities in the private sector.” Citing data from The Center for American Progress, which found that “poverty could be reduced by 26 percent through such straightforward measures as raising the minimum wage, expanding the EITC and Child Tax Credit and increasing the availability of child care assistance for low-income families,” they noted that these policies were not only the right thing to do but made fiscal sense as well. The Center for American Progress also estimated that the cost for expanding these tax credits is about $90 billion, compared with an approximately $500 billion cost to the nation each year from the impacts of childhood poverty.

All told, in 2015, the EITC lifted about 6.5 million people out of poverty, including about 3.3 million children, according to the Center on Budget and Policy Priorities.

This legislative session I’m calling on legislators in both parties, in both houses, to support economic fairness by increasing the Earned Income Tax and Child Care Tax Credits for working families in Wisconsin.

Child care costs are a significant barrier to economic growth in all parts of the country. Wisconsin is among the least affordable states for child care, with parents paying an average of $11,600 per year for care for an infant and $9,300 per year for pre-kindergarten care for a four year old child — more than a year’s tuition in the University of Wisconsin system.

What does that actually mean for a typical family? As an example, a family of four comprised of two parents, an infant, and a preschooler earning the state’s median income of $66,000 per year would spend approximately one-third of their income on child care costs. These prohibitive costs can price workers out of our workforce and limit economic activity.

Expanding the EITC and Child Care Tax credits will help lift working families all over the state out of poverty by putting money back in their pockets that they will use to stimulate our local economies. Families in Menominee County, where the poverty rate is 32.5 percent, will appreciate the boost just as much as families in Milwaukee County will.