The Governor’s Budget includes a plan to double the state’s EITC from 15 to 30 percent of the federal. Gateway Cities would disproportionately benefit from this change.
Together, the 26 Gateway Cities represent about one-third of the state’s taxpayers (35 percent) but well over half (57 percent) of all of those filing for the EITC. Governor Baker’s proposal to double the state EITC from 15 to 30 percent of the federal would generate more than $55 million annually in new income support for Gateway City residents.
Nearly one in four Gateway City residents would benefit directly. While the average increase in state credit is only about $300 per year ($26/month), families with multiple children and very modest earnings could receive up to triple that amount. It is difficult to put a figure on the increased economic benefits these particularly unstable residents would see in the form of greater economic security, but it would surely be substantial. Rigorous economic research shows the EITC has large and lasting effects on the children of those receiving it, including gains in tests scores and college attendance, reduced teen birth rates, and higher future earnings.
Drawing on Brookings Institution data for tax year 2012, the table below shows the share of Gateway City residents receiving the EITC, their average federal EITC refund, and the additional credit they would receive by increasing the state match to 30 percent.
An important question to ask in the context of this proposal is how can Gateway Cities ensure that residents file for the tax credit without losing significant dollars to unscrupulous tax preparers? While some communities are working hard to build financial opportunity centers that help with tax and other public benefits, most have very limited infrastructure for this important work. Previous MassINC research offers ideas on how Gateway Cities can put in place strategies to ensure residents have better access to wealth building financial services.