The Murphy administration will propose ramping up the Earned Income Tax Credit, a state incentive that proponents argue has lifted thousands of the New Jersey’s lowest-paid workers out of poverty, as part of the Fiscal Year 2021 budget slated to be presented Tuesday afternoon.
Gov. Phil Murphy’s budget calls for expanding the age eligibility for the EITC, lowering it from 25 to 21 years of age and adding upward of 60,000 participants, according to administration officials.
The EITC program works by providing recipients a refundable tax credit, which can be exchanged for cash from the state.
Under the state version of the program, the income limit is $15,270 for individuals at least 25 years old and with no children, increasing to $55,952 for a married couple with at least three children, according to the Division of Taxation.
Proponents argue that the EITC frees up money for lower-income residents to put dollars back into the local economy.
“[T]he EITC has helped millions of workers better make ends meet and afford basic needs for themselves and their families,” reads a November report from the progressive think tank New Jersey Policy Perspective.
As part of a law signed in 2018, the state has been gradually ramping up the size of the EITC, so that it is a greater percentage of its federal counterpart, reaching 40 percent by the end of 2021.
The state EITC is currently at 39 percent of the federal program, for which it has allocated $602.7 million under the current budget.
While a single adult earning $15,570 could get a tax credit of $206 under the state version, the federal version allows for a tax credit up to $529. Likewise, a married couple earning up to $55,952 could claim a tax credit of $2,557, while the federal limit is $6,557.
One bill introduced last year would have expanded the eligibility to anyone at least 18 years old, while another would have expanded the EITC amount to 50 percent of the federal program, but neither measure made it through the state Legislature before the voting session ended.l