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Making the poor poorer

The EITC has been an unfortunate victim of Oklahoma’s budget gridlock

In 2016, Oklahoma lawmakers were struggling to pass a state budget amid a massive revenue shortfall. Sound familiar?

One of the measures taken by lawmakers that year to fill their shortfall was making Oklahoma’s Earned Income Tax Credit (EITC) non-refundable. The EITC is a tax credit designed to incentivize work and keep low-income working families out of poverty. It grows along with wage income up to a maximum level and then phases out gradually, so it never becomes a disincentive to earning more wage income.

Making the EITC non-refundable in 2016 saved about $25 million for the state budget, but only by undercutting a key poverty-fighting tool with a long history of bipartisan support and proven, long-lasting benefits for entire families. Refundability is critical to the success of the EITC because it allows the credit to reward work even if families have small state income tax bills—yet these families are also paying sales taxes, payroll taxes, and, directly or indirectly, property taxes.

Without refundability, the EITC does far less to reduce poverty for those workers earning the least. For example, a single mother with two kids working full-time at $10 an hour ($20,800 annually) lost $231 when the state EITC was made non-refundable. A married couple with 3 children making $20,800 lost $313.

Gene Perry is policy director of Oklahoma Policy Institute. Find the rest of this article and more at okpolicy.org.