Earned Income Tax Credit could provide relief

Economic Security for Illinois calls for program expansion after failure of Fair Tax Amendment

Seen at a Chicago Poverty Summit held earlier this year, Harish Patel, director of Economic Security for Illinois, thinks expansion of the Earned Income Tax Credit could provide much of the relief sought in a graduated income tax — especially for low-wage workers. (One Illinois/Ted Cox)

By Ted Cox

In the immediate wake of the failure of the Fair Tax Amendment, an advocacy group suggests expansion of the Earned Income Tax Credit could provide some of the relief sought in a graduated income tax.

Harish Patel, director of Economic Security for Illinois, issued a statement Thursday saying: "The Fair Tax Amendment didn’t win the support needed from Illinois voters for the state to abandon its flat income tax. Rather than signify a need to stop talking about tax equity, Tuesday’s results emphasize the urgent need for solutions that work for working Illinoisans. Illinois’s General Assembly should pass an expansion of the Earned Income Credit to put cash into the pockets of hard-working families that need it most.”

The Earned Income Tax Credit, or EITC, is an established but often overlooked program in essence providing tax rebates for low-wage workers. It grows out of the concept of a “negative income tax” proposed by conservative University of Chicago economist Milton Friedman in the ‘70s. Illinois offers an 18 percent match on the federal program for workers, the majority of whom earned less than $60,000, with a state tax rebate of up to $1,157. A proposal to double that to 36 percent is pending in the General Assembly, and Patel has also suggested expanding eligibility to those making $75,000 and also timing rebates, perhaps quarterly, to spread the benefits over the full year rather than just at tax time when workers file their returns.

The Pritzker administration recently moved to streamline the enrollment process, making it automatic for state taxpayers who have already applied for the federal benefits. It also urged more workers to take advantage of the EITC at both the state and federal levels.

“The voters have been clear. They want the state to reduce the tax burden on low-income families,” Patel stated. “They want to give the middle class a shot at building wealth. They want to provide relief to thousands of poor Illinoisans who are watching their bank accounts dwindle or wondering how they will pay next month’s rent. And voters want this certainty as COVID-19 threatens or eliminates household incomes, and pushes families who were struggling before the pandemic into deep poverty.

“Voters know the Illinois tax system is broken,” he added. “Expanding the Earned Income Tax Credit would be an antidote to the regressive taxation Illinoisans face, while using a vehicle they know and trust to deliver relief."

Unlike many progressive issues, the EITC typically has bipartisan support. One Illinois suggested Wednesday that its expansion could help make any needed increase in the state’s flat income tax more progressive.

Patel warned last year that the Fair Tax proposed by Gov. Pritzker wasn’t giving Illinois taxpayers enough reason to vote for it, even as the brackets established by the legislature would have kept tax rates level or lowered them slightly for everyone making $250,000 or less.

“It’s easy to say no to things like this,” Patel said at the time. “Why try to change the whole system when all I’m going to be getting is $69 or $100 back? That’s not worth it.”

Patel recommended that EITC expansion could complement the push for a graduated income tax in Illinois. Now it could provide some of the same sort of relief for working families the Fair Tax was supposed to provide.