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LB 406 would hurt low- and middle-income families


LB 406 would adversely impact low-income families by eliminating the Earned Income Tax Credit (EITC) and Child Care Tax Credit (CTC).  We oppose the elimination of these credits because of the impact it will have on low- and middle-income families.

In 2007, Nebraska expanded the EITC to 10% of the federal EITC.  For low- income, working families, these refundable credits help offset some of the other taxes families pay and help them meet their families’ basic needs.  The federal credit was claimed on 132,185 income tax returns in 2010 and refunded approximately $27,579,866 to those taxpayers.[1]  Almost 1 in 6 income tax filers benefited from these targeted refunds.  Here is the impact of the EITC on the Legislative Districts of the members of the Revenue Committee:

Senator Sullivan
Senator Schumacher
Senator Pirsch
Senator McCoy
Senator Janssen
Senator Harr
Senator Hansen
Senator Hadley

In order to receive the EITC families must be working and earning wages  to qualify.  Most of the families claiming the EITC in Nebraska have adjusted gross incomes between $10,000 and $20,000 a year.[2]  (A worker earning minimum wage would earn $15,080 per year if they  worked full-time, year-round.)  For families in this income range, every penny counts and helps them meet their basic needs.  Families use their EITC refund to cover essential needs.

The EITC is one of the most effective tools we have for reducing poverty, especially among children.   In Nebraska, the EITC kept 38,009 people – 19,028 of whom were children – above the poverty line.  Nationally, the EITC has kept 6 million people – 3 million of whom were children – above the poverty line.[3]

Also in this proposal, the Child Care Tax Credit would be impacted. In 2011, the refundable portion of the Child Care Tax Credit returned $6.8 million to 12,100 families making less than $29,000 per year.  This credit helps to offset the costs of child care so families can work.[4]

Studies show that the impact of these tax credits for children and families are significant.  An increase in family income from these credits increases student achievement in school  as well as the child’s future earnings as an adult.  The investment we make in working families through the EITC and CTC puts children on a solid path to a prosperous future both for themselves and our economy.[5]

We urge the Revenue Committee to IPP LB 406.  Instead, let’s take a longer look and find ways to reform our tax policy that enhances the quality of life for Nebraska’s low- and middle-income families.


[1] Based on 2010 federal tax return data.  Accessed at http://www.brookings.edu/research/interactives/eitc.

[2] Nebraska Department of Revenue

[3]“Working Families Kept out of Poverty by the EITC and CTC, 2009-2011,” Brookings Institution analysis of Supplemental Poverty Measure Public Use Data. Accessed at www.taxcreditsforworkingfamilies.org/working-families-poverty-eitc-ete-state/

[4] Nebraska Department of Revenue

[5] “Studies Show Earned Income Tax Credit Encourages Success in School and Reduces Poverty,” Center on Budget and Policy Priorities. June 26, 2012.

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