Let’s Increase State Assistance to Working Poor Families, says — Charlie Baker?

Last week’s second most surprising story about the 2014 Governor’s race: one of the candidates wanted to discuss poverty in Massachusetts and how to alleviate it.

Last week’s most surprising story about the race: that candidate was Republican Charlie Baker.

In a Boston Herald Radio interview, Baker endorsed the idea of providing more state assistance to poor working families by increasing the state Earned Income Tax Credit.

A little background: the Earned Income Tax Credit program (EITC) is one of the nation’s most effective anti-poverty measures. It began as a federal program, and President Ronald Reagan, who loved the idea of using the mechanism of a tax credit to assist working poor citizens, expanded it significantly. The key to the program’s success is that the tax credit is refundable: a low-income taxpayer who qualifies for a credit of, say, $2500, uses part of the credit, say, $250, to satisfy his or her federal income tax obligation, then receives the remainder of the credit in cash. Particularly during this Great Recession, the EITC has helped to keep families housed, fed and able to get to work. (If you wondering whether any of the tax credits that help businesses are similarly refundable, the answer is yes.)

About half of the states, including Massachusetts, have built on the success of the federal EITC by offering their own state EITC programs, which provide a percentage of the federal credit. In Massachusetts, the state EITC is 15 percent of the federal amount.

In his Herald Radio interview, Baker doubted the wisdom of raising the minimum wage, contending that it would eliminate jobs and hurt small business. That position was not a surprise, but what he said next was: “What I would much rather see us do is put some real, sort of turbo, into the Earned Income Tax Credit.”

The radio hosts countered with the recent report that fast food workers in the U.S. are so woefully underpaid that the government must offset their living expenses to the tune of $7 billion annually through programs like Medicaid, Food Stamps and the Earned Income Tax Credit. Asked whether assisting these underpaid workers should be a government responsibility, Baker said yes:

If we really want to make work pay here then I think the state ought to put its money where its mouth is and really bump up in a big way the earned income tax credit so that people can significantly enhance what their take-home pay would be. through what would in effect would be a tax cut.

So what would putting some turbo into the Massachusetts EITC mean? Let’s say, doubling it from 15 to 30 percent (the state with the highest credit is Vermont, at 32 percent). That would mean that the 395,000 Massachusetts working families who qualify would get an average $330 increase annually (the highest state EITC amount for this tax year is $883). Doubling the credit would cost the state $132 million.

By contrast, an increase of one dollar in the minimum hourly wage for a 35-hour per week job would result in gross income increase of $1800 annually, some of which would be paid as payroll taxes, increasing state revenue. But you certainly don’t have to agree with Charlie Baker that increasing the minimum wage is a bad idea in order to agree with him that increasing the state EITC is a good one. (It also happens to be an idea that our current Governor has never proposed.)

My advice to the Democratic candidates: see him and raise him.

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