Two Pennsylvania state Senators from opposite sides of the aisle are asking colleagues to support legislation they are drafting to create a state earned income tax credit (EITC). 

For nearly a half-century, lower-wage workers have benefitted from a federal EITC which ranges from $560 to $6,935 for a household earning up to $59,187, depending on the number of that filer’s qualifying children. In 2021, this program bestowed $1,874 on the average Pennsylvania family.

In a memorandum to their fellow senators, Lynda Schlegel Culver (R-Bloomsburg) and Judy Schwank (D-Reading) argued for making the commonwealth the 32nd state to offer an EITC against state income taxes. Neighboring Ohio offers a nonrefundable income tax credit while Delaware, Maryland, New Jersey and New York all have EITCs that are refundable as the Culver-Schwank credit would be. 

“The inability to afford basic needs is all too common for many of the Commonwealth’s lower income, working households,” Culver and Schwank wrote. “With many pandemic supports set to expire, the struggle will only worsen for many.… [I]t is imperative that we find a commonsense solution which provides economic relief for hardworking Pennsylvanians.” 

Culver and Schwank suggested their measure would provide critical help to working state residents who nonetheless struggle to pay for basic needs like food, clothes, transportation and childcare. The United Way of Pennsylvania (UWP) refers to this population as ALICE (Asset Limited, Income Constrained, Employed) and reported that 27 percent of Pennsylvanians fit this description in 2021, seven percent more than did two years prior. The state-EITC sponsors’ memo stated that the average Keystone State family would have received $197 and $594 from their proposed program in 2019. 

Citing the UWP report Implementing a State Earned Income Tax Credit (EITC) in Pennsylvania: A Benefit-Cost Analysis, Culver and Schwank asserted the commonwealth would realize $4 in economic growth for every $1 devoted to their proposed program. They further predicted the state would save $3 on social spending per dollar allotted to the state EITC. 

According to Elizabeth Stelle, director of policy analysis at the Harrisburg-based Commonwealth Foundation, the idea may have merit but would be best considered as part of a transition from the kind of social spending that disincentivizes work. 

“The EITC has been one of the more successful programs in terms of moving people toward earned success, increasing their actual incomes…,” she said. “And generally speaking, it’s a much better idea to structure any sort of safety-net program around workforce development than it is just around an entitlement mindset. So if you’re looking at how [to] help more Pennsylvanians succeed, a state EITC is a better way versus expanding Medicaid or some other entitlement program.” 

Still, Stelle said, the commonwealth would need to budget for the kind of credit Culver and Schwank want, so its implementation should come along with curbs on other welfare spending. Examples she gave included new work requirements for Medicaid or stronger such requirements for the Supplemental Nutrition Assistance Program (SNAP). 

“Lawmakers would have to decide, ‘Okay, where would that additional tax credit come from?’” she said. “What are we not going to do if we do the EITC? The more we can do to create a comprehensive assistance system that rewards success, the better, and doing things like consistent work requirements across SNAP and Medicaid will go a long way to doing that in conjunction with something like an EITC. But we need to resist the temptation to keep layering another assistance program upon another assistance program without looking at how they interact with each other.” 

Stelle cautioned against expecting too great an automatic cost savings from a state EITC since those who receive the program would not suddenly become broadly ineligible for other assistance programs.

“There’s some overlap there,” she explained.

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Bradley Vasoli is managing editor of The Pennsylvania Daily Star. Follow Brad on Twitter at @BVasoli. Email tips to [email protected].
Photo “Judy Schwank” by Judy Schwank. Photo “Lynda Schlegel Culver” by Lynda Schlegel Culver for State Senate. Background Photo “Pennsylvania Capitol” by Schindlerdigital. CC BY-SA 4.0.