Blog, Deseret News Columns

Here’s why the Utah Legislature should pass an earned income tax credit

Originally published in the Deseret News.

The prominent journalist and author Megan McArdle once observed that Utah is “a bit like Sweden … if it were run by the U.S. Chamber of Commerce.” This statement captures something truly special about the Beehive State — we care for the common good but do it in an evidenced-based and fiscally conservative way.

The Utah Legislature has the chance to build upon Utah’s innovative and conservative public policy reputation by supporting an earned income tax credit (EITC) for Utah families trapped in poverty. Here’s why the Legislature should pass HB57: Utah Intergenerational Poverty Work and Self-Sufficiency Tax Credit.

First, the legislation is fine-tuned to exactly the population we want to serve. Unlike reducing or eliminating the sales tax on food, which is a blunt instrument to help low-income individuals, the EITC precisely targets low-income working families that have had poverty passed from successive generations. Public policy works best when we match our policy action with our policy goal. It doesn’t get much better than the EITC if you want to help poor working families stuck in the cycle and human tragedy of poverty.

 

Second, the legislation rewards self-reliance and work. Only families that work and pay taxes are eligible for the credit. That is the essence of an EITC … it is earned.

We also know incentives work. There’s a saying that all of economics can be broken down into four words: people respond to incentives; the rest is just color commentary. HB57 provides a meaningful incentive to work and pay taxes. If you do so, society will help you make ends meet, whether it’s help with a rent payment, food on the table, a new pair of shoes for your children or other basic needs.

Third, the legislation is fiscally constrained. Earlier versions of EITC legislation in Utah cost an estimated $25 million because the legislation targeted the entire poverty population. HB57 carries an affordable fiscal note of $6 million because it targets only the intergenerational poverty population. Even better, it provides twice the credit to each family as earlier proposed legislation, so the benefit can really make a difference.

Finally, the legislation includes measurable outcomes. The Intergenerational Poverty Mitigation Act, passed in 2012, requires Utah government entities to share administrative data across agencies, develop a system to track intergenerational poverty, identify trends and study and develop plans and programs to help individuals and families break the poverty cycle. Utah now has one of the most complete data sets in the country on families suffering economic hardship over successive generations and a plan to help alleviate the problem. Because of this work, we can actually track HB57’s effectiveness. Traditional poverty assistance programs fall far short of this aim.

Twenty-nine other states, 11 from red states like Utah (including two more in the past year — South Carolina and Montana), have passed an EITC. I like Utah’s current proposal best because it focuses spending on people trapped in intergenerational poverty, thereby reducing cost and concentrating the effectiveness.

I visited Washington, D.C., last week as a guest of the American Enterprise Institute. They invited me because they wanted to learn more about Utah’s intergenerational poverty work as an example of innovative and locally driven public policy. I mention this because the nation watches and emulates smart public policies in Utah. Our national public policy leadership will be even stronger if we pass HB57.

I know of no public policy innovation over the past 30 years to help low-income individuals that has as much promise as Utah’s intergenerational poverty work. When combined with an EITC, Utah will be able to show the nation how public policies that are targeted, incentivize work, are fiscally constrained and include measurable outcomes are the best way to help families and children with great need. Even more important, we will help 25,000 working families in Utah live happier, more productive and self-reliant lives. That’s public policy at its best.