The state budget lays the foundation of a strong economy and thriving communities. For Maine to prosper, the budget must address shared problems and work to meet common goals. Good budgets raise enough revenue to make investments that build a stronger workforce, help young families make a good start, support modern infrastructure, and address other goals that benefit all of us now and in the future. However, recent state budgets undermined our ability to meet these goals and instead prioritized tax breaks for the wealthiest Mainers.
Tax breaks that have predominantly benefited wealthy Mainers and corporations jeopardized state capacity to make key investments in a healthier economy and the wellbeing of Maine people. For 2015, general fund spending as a percent of state GDP was at its lowest in 25 years apart from 2010 and 2011 when tax revenue was hard hit by recession. That means state revenue hasn’t kept pace with the costs of maintaining state services or making additional needed investments and costs have shifted to local communities as a result. The voter approved education funding initiative will help buck this trend by increasing taxes on high income households, but more changes are needed to grow and diversify revenue sources to invest in all the elements of a stronger economy.
Our economy is strongest when people have money to spend and, while the rest of the nation is recovering from the recession, New Mexico is still struggling to attract good-paying jobs. When people work full time and still don’t earn enough money to cover the basics, our economy is not at its healthiest. Tax credits for low- and moderate-income working families are one common-sense way to spur economic activity and put money in the hands of consumers who will spend it, particularly when wages are low.
In New Mexico, the Working Families Tax Credit is one of the most sensible parts of our tax code: it encourages work, helps to raise hard-working families out of poverty, and benefits almost 300,000 children, while also pumping millions of dollars back into local communities. Increasing the credit is a smart investment in New Mexico’s businesses, working families, and future.
Working full time, year round is not enough to guarantee a middle-class standard of living. Nearly one in five working Iowa families, in fact, does not earn enough to meet basic needs. There are a number of things that could be done to help such families move into the middle class. Policies are needed to improve both the demand-side and the supply-side of the labor market. On the demand side, we need more middle-class jobs with decent wages and benefits. On the supply side, we need more workers with the education and skills needed to qualify for most good-paying jobs.
What we focus on here, however, is a set of policies called work supports that help low-wage working families survive and keep their children out of poverty, and that provide a stepping stone to a better education and a better job. We lay out a set of policies to strengthen these pathways to the middle class:
• Reform Iowa’s Child Care Assistance program to eliminate a huge disincentive called the cliff and to make it more effective as a help to parents trying to improve their skills and raise their wage level.
• Expand the Earned Income Tax Credit to provide even stronger support to low-wage workers, encourage more work effort, and keep children out of poverty.
• Expand the Child and Dependent Care Credit to cushion the loss of Child Care Assistance.
These reforms should be combined with education policies that ensure future generations of Iowans receive a quality and affordable education, from preschool through post-secondary institutions. This will require expansion of the universal preschool program, support of K-12 education through adequate funding of state foundation aid, and continued efforts to make post-secondary education more affordable by restraining tuition growth.
Georgia is missing out on a time-tested tool that helps hardworking families, boosts small businesses and strengthens local economies. Twenty-six states and the District of Columbia give a critical boost to families that work but struggle to make ends meet through a state Earned Income Tax Credit (EITC). For full details on the case for enacting a state EITC in Georgia, see A Bottom-Up Tax Cut to Build Georgia’s Middle Class.
Enacting a state EITC, or Georgia Work Credit, would be an ambitious investment in more than 1 million families striving to break the cycle of poverty and ascend the economic ladder. As with any other public investment, it carries a cost in lost state revenue. That cost depends on two factors. First, the size of Georgia’s state match. Most state EITCs are set at a percentage of the federal credit, ranging from a low of 3.5 percent in Louisiana to a high of 40 percent in Washington, D.C. Second, lawmakers can choose whether a Georgia EITC is refundable or non-refundable. In all but three states with an EITC, lawmakers chose the refundable option to let working families keep the full value of the credit even if it exceeds their state income taxes.