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Opinion: Cut taxes, yes, but also help the poor

Utah should launch a matching program for the federal earned income tax credit

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Tax professional and tax preparation firm owner Alicia Utley views a Form 1040 on her computer.

Tax professional and tax preparation firm owner Alicia Utley views a Form 1040 on her computer in her office at Infinite Tax Solutions, in Boulder, Colo. Millions of Americans are eligible for the earned income tax credit, which provides generous benefits.

Brennan Linsley, Associated Press

With state revenues at record levels, there will be enough money this legislative session to help state employees, give a big boost to education and return tax dollars to hardworking Utahns. There is support mounting for an across-the-board income tax cut, which I applaud, but I also implore my colleagues in both chambers to consider special help to low-and moderate-income working families.

We can help these families in a way that can be a hand up, not just a handout. Utah can launch a matching program for the federal earned income tax credit (EITC). 

The EITC was the brainchild of the 20th century’s leading conservative economist, Nobel Prize winner Milton Friedman in his 1962 opus “Capitalism and Freedom.”  The federal EITC was enacted under Republican President Gerald Ford and subsequently expanded by President Ronald Reagan, who called it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

Congress has continued to grow the EITC program since. “This is one of the few programs that have shown results,” noted former U.S. House Speaker Paul Ryan. “It encourages people to work by increasing the rewards of work.”

And because it reduces poverty responsibly by promoting self-sufficiency, 30 states have passed state matching programs for EITC. These have most recently passed in Missouri, Montana and South Carolina, all red states that share Utah’s disdain for welfare and high regard for achieving a better life through one’s own hard work.

In Utah, the federal EITC is claimed every year by about 1 in every 6 Utah tax filers. It has been endorsed by Utah’s Intergenerational Poverty Welfare Reform Commission as a critical element of Utah’s anti-poverty strategy, which places the highest priority on getting low-income Utahns into the workforce. 

For years, smart and compassionate groups as diverse as the Salt Lake Chamber, the Sutherland Institute, the United Way, and Voices for Utah Children have advocated for a Utah EITC. “Utah will be able to show the nation how public policies that are targeted, incentivize work and are fiscally constrained are the best way to help families and children with great need,” wrote Natalie Gochnour with the Kem C. Gardner Policy Institute.

But this year it is more important than ever that Utah finally adopt an EITC. Working families have been especially hard hit by both COVID-19 and rampant inflation. They desperately need our help.

Meanwhile, Utah employers are facing a record worker shortage. Our labor force participation rate — the percent of working age adults who are in the workforce — still has not recovered to pre-pandemic levels. Literally tens of thousands of Utahns are sitting on the sidelines while critical jobs go unfilled. 

There is no public policy with a better record of drawing potential workers into the workforce than EITC. Research at the American Enterprise Institute recently revealed that there is “robust evidence that EITC expansions increase the extensive margin of labor supply.”

Moreover, the “cost” of the Utah EITC match — which can scale to whatever matching percentage state leaders want to put in — actually costs much less when we consider that the EITC mostly pays for itself through expanded taxes paid by new workers and reduced welfare dependency.

Low-income Utahns, who already pay over 7.5% of their modest incomes in state and local taxes, will still have plenty of “skin in the game” even with the Utah EITC. We cannot have an income tax cut without doing something additional that would be significant for Utah’s low-and moderate-income working families.

Now is indeed the time for Utah to become the 31st state with our own earned income tax credit. 

Representative Mike Winder, R-West Valley, is the former mayor of West Valley City and is serving in his sixth session in the Utah House of Representatives.