Boosting tax credits for low-income families in Nebraska could pack an even bigger punch against poverty than increasing the state's minimum wage, supporters said Wednesday.
The earned income tax credit is a refundable credit for people, particularly those with children, whose jobs provide low or medium incomes.Â
A bill sponsored by Lincoln Sen. Patty Pansing Brooks would raise Nebraska's earned income tax credit over the next two years from 10 percent to 15 percent of the federal credit allowed.
The higher percentage would have amounted to an extra $113 on average for 136,000 Nebraskans who claimed the federal credit last year, based on Internal Revenue Service data.
"It doesn't make anybody rich," said Jon Bailey, a lobbyist for the Center for Rural Affairs, a Lyons-based organization that focuses on rural communities.
People are also reading…
But research has shown the tax credit is the nation's most effective anti-poverty policy, Bailey told members of the Legislature's Revenue Committee during a hearing on the bill () Wednesday.
"It rewards people for working," said Pansing Brooks, who called poverty "the one key critical issue" in her district and a growing problem across the state.
The Legislative Fiscal Office estimates the proposed increase in the credit would cost the state more than $17 million beginning in 2017, the first year it would be fully implemented.
"That money would be quickly spent back into Nebraska's economy" because recipients would likely use it for monthly expenses, not long-term investments, Pansing Brooks said.Â
Raising Nebraska's credit would "put us on par with our neighboring states" said Aubrey Mancuso of the advocacy group Voices for Children in Nebraska.
Iowa (14 percent), Kansas (17 percent) and Colorado (10 percent) each offers a credit on top of the federal earned income tax credit. South Dakota, Missouri and Wyoming do not.
Sen. Paul Schumacher of Columbus raised questions about how the credits could still be obtained by people who are technically low-income earners but have substantial savings or investments, or own large amounts of land or personal property.
"There are a lot of ways around it," Bailey said.
Still, he said, low-income Nebraskans have been largely missing from the state's tax policy discussions.
"That is one of the reasons LB495 is so important," Bailey said. "It's the one piece of tax policy that truly benefits these families."