Point of View: Oklahoma lawmakers should restore the earned income tax credit
Want to reduce poverty and help working families get ahead in Oklahoma? Lucky us, we already have a great tool — the earned income tax credit (EITC). In 2000, Oklahoma lawmakers created the state EITC as a partner to the federal EITC with bipartisan support. It was a good idea then and it’s still a good idea. The EITC encourages work by supplementing income from low-wage jobs. Our state tax code already includes many deductions and credits for high-income families and businesses; this credit for low -and middle-income families is an important piece in making Oklahoma’s tax code more fair to all taxpayers.
Unfortunately, the EITC in Oklahoma is less valuable than it used to be. To help fill a budget shortfall in 2016, the Legislature cut the credit by making it nonrefundable. Now, if the amount of the credit is more than the household’s income tax bill, the balance is not refunded.
That cut resulted in more than 200,000 working Oklahoma families losing some, or all, of the value of their EITC. Statewide, these families lost nearly $28 million — an average loss of $121 per family. To put that in perspective, $121 equals a three-month supply of infant diapers, a week’s worth of school clothes or a month’s worth of gas.
Cutting the EITC was also a loss for our communities. Households that receive the EITC use a large part of their tax refunds to buy basic needs or take care of bigger-ticket items they’ve been putting off. Their purchases put money back into the local economy to support local business and generate sales tax revenue. In fact, each additional EITC dollar generates between $1.50 and $2 for the local economy, according to the National Conference of State Legislatures.
Without refundability, the EITC doesn’t work as well for working families or for our economy. Low-income families are already paying their fair share of taxes in sales and payroll taxes. They’re working hard to stay afloat, and cutting this important boost to their financial security was the wrong way to fill the budget hole. Many lawmakers have said they regretted cutting the EITC at the time and most still regret that decision today. Now that the state’s finances have stabilized, restoring the Oklahoma EITC should be a priority for lawmakers this year.
Cullison is an economic opportunity policy analyst with Oklahoma Policy Institute (www.okpolicy.org).