Tax Break For Working Poor Should Be Expanded, Report Says

NJ.com — Wednesday, January 24, 2007

The Associated Press

TRENTON, N.J. (AP) — A state tax break designed to assist poor families doesn't help hundreds of thousands who should benefit from it, according to a report that urges New Jersey to revamp the program.

The Corzine administration said it would consider the report as it looks to cut taxes for low-income residents.

The state's Earned Income Tax Credit (EITC) helps residents who work but earn less than $20,000 annually. Though they don't pay state income taxes, the EITC makes tax refunds available to them to try to make them more self-sufficient.

But a report released Wednesday by New Jersey Policy Perspective, a liberal think tank, found that New Jersey's $20,000 limit is the lowest among the 19 states that offer the credit.

The federal government also offers an EITC, and other states use the federal limit. Based on family size, it allows families who make up to $38,222 per year to qualify for the tax help.

In 2005, about 486,000 New Jerseyans got the federal credit, but just 203,000 of them also were able to get state help.

"Those who qualify for the state Earned Income Tax Credit need it more than ever," said NJPP President Jon Shure. "Reform is long past due."

Shure said problems with the state's EITC are intensified by New Jersey's high cost-of-living. New Jersey also doesn't provide EITC benefits to residents without children, help the federal government and 16 states provide.

New Jersey's EITC is equal to 20 percent of a resident's federal EITC. For instance, a resident who got $3,000 through the federal EITC would get $600 from New Jersey's.

NJPP wants the state to raise its EITC income limits to match the federal rules, give the credit to those without children and increase the state's EITC level to either 25 or 30 percent of the federal credit.

If those changes are made, the program would cost the state up to $238.5 million next year, up from $113.5 million this year, NJPP estimated.

Gov. Jon S. Corzine is considering cutting taxes for lower-income families this year by increasing the threshold at which families start paying income taxes, boosting the level from $20,000 to $25,000, and cutting income taxes for those who earn $25,000 to $30,000.

"The administration remains committed to providing tax relief to low-income citizens," Treasury spokesman Tom Vincz said. "We will look at this proposal in the context of other methods of working to ease the tax burden on our most vulnerable citizens."

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