Update: April 23. I’m pleased that Charlie Baker has announced that he’s now “comfortable” with a minimum wage increase to $10.50 per hour. And he’s still calling for an increase in the state EITC. Still waiting to hear how that (and all the other tax breaks he wants) can be paid for, but this is good news. Congratulations again to everyone who has worked to get the minimum wage increase on the ballot, making candidate support for it nearly universal.
Discussing her party’s urgent need to broaden its base, Mass GOP chair Kirsten Hughes told the Globe, “It’s not rocket science. We have to go to places we haven’t typically gone.”
The most important of the places where the GOP hasn’t typically gone is Boston. Democrats do so well there that a Republican turnout managing to hold the Democrats’ victory margin to 40 points or less is regarded as an ambitious goal. The GOP has similar hopes of increasing turnout in Lowell, New Bedford, Worcester and Springfield — “the urban cities,” as Hughes refers to them.
As part of this effort to extend the party’s appeal beyond the affluent suburbs, Republican candidate for Governor Charlie Baker, like his Democratic counterparts, has been talking about the problem of income inequality. A big part of his solution to that problem would be a significant increase to a state program that helps low-income working families make ends meet. Baker thinks we should put some “turbo” (his term) into the state Earned Income Tax Credit program.
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.
The Earned Income Tax Credit is both a federal and a state program. It is a “refundable” credit, which means that a hypothetical low-income taxpayer who qualifies for a federal credit of, say $2000, uses part of the credit, say, $200, to pay the income tax that is owing, and then receives the remainder of the credit in cash. About half the states, including Massachusetts, have chosen to supplement the federal credit with a state-funded credit set at some percentage of the federal amount. The Massachusetts EITC is set at 15 percent, so that hypothetical low-income taxpayer gets a state credit of $300. If, by putting some “turbo” into the state EITC, Baker is proposing to double it, the state credit would increase to $600 annually.
So who in Massachusetts receives the EITC? The Brookings Institute, which follows the program very closely, offers this demographic profile of Massachusetts EITC-eligible families: they have a median adjusted gross income of $13,381 per year; the educational level of half of them is a high school diploma or less; sixty-five percent are white, sixteen percent are Hispanic and twelve percent are black.
Maybe, like me, you’re wondering how high a priority the EITC increase really is for Baker. Sure, the EITC is the Republicans’ favorite anti-poverty program, but that doesn’t mean a whole lot. And when a minimum wage increase is in the picture, you can count on Republicans to tout the EITC as an alternative — government steps in to help, but only when otherwise private industry would be asked to do so. Baker supports a minimum wage increase but has not offered a specific number (below which, as the statute happily puts it, any wage “shall conclusively be presumed to be oppressive and unreasonable”). I’d bet his number is below the $10.50 per hour endorsed by the House (much less the $11.00 endorsed by the Senate) and which is also the number specified in the initiative petition on its way to the statewide ballot in November.
Baker’s comments in reaction to the budget proposal that the House Ways and Means Committee released last week suggests that the answer is that an EITC increase is not a very high priority at all. The House budget proposal did not include an EITC increase and Baker offered no criticism of that decision. But he did have plenty of criticism for the House plan to use $140 million from the state’s “Rainy Day Fund” to help balance this year’s $35 billion budget.
“[The Legislators] know it’s not good fiscal policy to take money out of the rainy day fund when it’s not raining. That’s supposed to be there to solve problems and to help the state weather really tough times,” “I don’t think taking money out of the rainy day fund makes a lot of sense. You should use the rainy day fund when it’s actually raining.”
As it happens, the same amount of money the House proposes to take from the Rainy Day Fund — $140 million — would pay for Baker’s proposal to turbocharge the state Earned Income Tax Credit. He might have responded to the House budget proposal by making a pitch for an EITC increase but he didn’t. It was just more comfortable to say that spending was out of control.
It may not be actually raining where Charlie Baker lives, but that’s the whole thing about income inequality — it rains a lot in some places and not at all in others. If you think that increasing the EITC is a very good way to fight income inequality, as Baker seems to do, then you recognize that income inequality means some places are poorer than others, and EITC receipt is a proxy for poverty. Take a look at the Brookings’ numbers from two legislative districts in the state:
Eighth Essex Legislative District (includes Baker’s home town of Swampscott)
Families receiving EITC: 1,834
Total value of EITC received: 3,726,331
Fifth Suffolk Legislative District in Boston
Families receiving EITC: 4,719
Total value of EITC received: $10,568,494
If you’re serious about income inequality, you understand that the weather is not the same everywhere. To quote Kirsten Hughes again, that’s not rocket science.