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Scott Walker proposes increasing tax credit for working poor

Gov. Scott Walker speaks during a Future of the Families Commission meeting last year. He is proposing changes to the earned income tax credit based on the commission's recommendations.

WAUWATOSA — Gov. Scott Walker plans to increase a state tax credit for low-income working families — but it applies only to those with a single child.

The increase to the Earned Income Tax Credit (EITC) would come six years after Walker reduced the credit as part of a budget savings plan.

It is the latest spending proposal Walker has unveiled ahead of his 2017-19 budget address next Wednesday.

Speaking Wednesday to a Rotary Club meeting in Wauwatosa, he called the spending an investment of “reform dividends” — referring to the savings the state has reaped from his 2011 Act 10 changes to public employee benefits.

“What we have now is what we call the ‘reform dividend’ and it allows us to invest in our priorities at an even higher level than we did before,” Walker said.

The EITC provides a refundable income tax credit to low-income working families based on a percentage of a similar credit provided by the federal government.

Democrats, who opposed Walker’s reduction of the EITC in 2011 and have advocated for increasing it in past budgets, were pleased that Walker plans to boost it, which would cost $20 million a year starting in the second year of the budget, according to Walker spokesman Tom Evenson.

“Anything that we can do to try to expand the EITC is a good thing,” said Rep. Jimmy Anderson, D-Fitchburg. “It should be a place where Republicans and Democrats can come together. It rewards work. It’s just smart tax policy.”

Walker is scheduled to introduce his budget proposal next week. After that, lawmakers will get a chance to revise it.

Single child only

Democrats, however, criticized the idea that only low-income families with one child would benefit from Walker’s proposal. Rep. Lisa Subeck, D-Madison, criticized it as unfair to low-income families with more children.

Walker’s office noted the current benefit is 15 times greater for families with three or more children than for families with one child. Also the state has the second-lowest credit for families with one child, but the third-highest for families with three or more children among states that have an EITC.

For families with one child, the credit would increase from 4 percent to 11 percent of the federal credit, increasing the maximum amount that could be claimed from $135 to $371. The amount decreases as a claimant’s income increases.

According to Walker’s office, more than 130,000 low-income working families would benefit. There are currently 253,000 families already receiving the credit, for a total of about $100 million per year. It would also lift an additional 850 families above the poverty line.

The credit is refundable, so for some families it reduces tax liability and for others it results in a tax refund.

Families with two or more children wouldn’t be affected by the proposal. They will continue to receive the credit as enacted under the 2011-13 state budget.

Under that reduced rate, the maximum credit is $613 for families with two children and the maximum is $2,131 for families with three or more children. Overall, those changes saved the state about $16.3 million per year.

The state spent $101.8 million in taxpayer money on the credit in 2015-16, about one third of it from the state and the rest from the federal government. That compares to $126.2 million a year before the state made changes to the credit, with about $82.5 million coming from the state and the rest from the federal government.

The tax credit is among several proposals Walker introduced Wednesday that he said would help strengthen families.

“Families are the foundation of our society,” Walker said in a statement. “While we are taking steps to make public-assistance programs a trampoline, not a hammock, a second vital component to move children out of poverty is to ensure families and work are rewarded, not penalized.”

Life and career planning

Walker is also proposing that the state Department of Public Instruction incorporate “The Success Sequence” into K-12 school academic and career planning programming starting in 2019. The sequence, which was recommended by Walker’s Future of the Family Commission and is based on research from the Brookings Institution, emphasizes that students should graduate high school, get a job and wait to have children until age 21 and after marriage.

Walker framed the issue as one of lifting people out of poverty from a young age. He pointed to research that found only 2 percent of adults who follow those steps end up living in poverty and 75 percent end up in the middle class.

“It’s not about morals. It’s not about values,” Walker said. “It’s about science.”

The Brookings research also shows a racial gap in those who adhere to the three steps, with 59 percent of blacks attaining middle-class status compared with 73 percent of whites.

Jenni Dye, research director for the liberal advocacy group One Wisconsin Now, said there are other strategies for preventing premarital pregnancy that Walker has opposed, such as providing contraception and reproductive health services to low-income women.

“Poverty will be solved through structural change that gives people opportunities to succeed, not through Gov. Walker preaching about their individual choices,” Dye said.

Other proposals Walker announced:

  • $1 million for the Department of Children and Families to implement a public messaging campaign based on the “Success Sequence” and emphasizing father involvement in children’s lives.
  • Require custodial and noncustodial parents to comply with child-support orders to get FoodShare benefits, a reversal of a policy change under former Gov. Jim Doyle.
  • Starting in 2018, allow couples for the first three years after marriage to receive the greater of either the EITC they would receive as a married couple or before they were married.

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