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opinion | Stanley C. Rosenberg

EITC helps the working middle class

shutterstock/Shahril KHMD

The state Legislature last week took an important step toward reducing income inequality by voting to increase the state’s Earned Income Tax Credit — a tax benefit for those making $50,000 or less — for the first time since the credit was created 18 years ago.

As an original coauthor of the EITC back in 1997, I had a personal interest in seeing the 415,000 EITC recipients finally get an even larger reward for working hard to keep their families afloat. And with Governor Baker embracing the idea during last fall’s campaign, it seems that we can make this a law.

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The long overdue increase has taken on new urgency, given the growing levels of inequality, especially in Massachusetts. In one recent report, Boston had the third highest rate of income inequality among the nation’s 50 biggest cities. Several other studies have ranked our state among the top 10 in income inequality.

The paychecks of too many Massachusetts workers have fallen behind. This erodes the foundation of a strong economy, a healthy middle class, and it saps the belief that our state is a place where hard work and persistence can lead to a better life.

Increasing the EITC fosters the strength of hard-working families. According to the Massachusetts Center for Budget and Policy, the federal EITC and the federal Child Tax Credit combined to lift 9.4 million Americans out of poverty in 2013, five million of them children. In Massachusetts, these two federal tax credits — even without figuring in the state’s separate EITC — combined to help keep roughly 74,000 Massachusetts children out of poverty.

Researchers have also found other benefits. EITC participation improved the health of children and boosted educational performance, which in turn, helped these kids earn more as adults, save more for retirement, and increase their social security benefits.

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Our plan doubles down on those positive social outcomes by increasing the state’s version of the EITC by more than 50 percent. With our legislation, a family that qualifies for the maximum EITC will get a tax break of more than $1,400 — not a small amount for those at or near the poverty line.

By rewarding people for work, we’re helping lower income residents advance in a broad array of social areas. This important policy balance is why liberals, conservatives, and moderates can all get behind this goal — it achieves both progressive tax ideals and meets important conservative principles, such as moving the poor off public assistance.

And most can get behind the responsible and equitable way we found the money to finance this increase: by closing a corporate tax loophole that would have cost the taxpayers $535 million over a seven-year period. Tax breaks for investment in Massachusetts often make sense, but this particular break allowed a handful of big companies to reduce the taxes on their profits – and with no guarantee that these savings would be put back into our Commonwealth.

With this EITC increase, the Legislature has taken an important step to reduce income inequality and reward those who doing their best to get ahead. We hope the governor signs the legislation. If he does, the winners will be not just those in lower income brackets. We will all profit from living in a state in which hard work is rewarded, taxes are more equitable, the working middle class gets a break, and our entire economy benefits.

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Stanley C. Rosenberg is president of the Massachusetts Senate.