Maryland Passes Earned Income Credit Information Act
Before adjourning its legislative session, the Maryland State Legislature passed the Earned Income Credit (EIC) Information Act. This Act requires employers to notify employees that they may qualify for the federal Earned Income Tax Credit (EITC) and Maryland’s EIC, tax credits targeted to low- and moderate-income workers. Maryland Hunger Solutions applauds the passage of this bill, noting that increased awareness of these tax credits will help alleviate hunger and improve the economic security of many hard working Marylanders.
Maryland’s EIC compliments the federal EITC, which is widely regarded as one of the most effective poverty-fighting programs. Like the federal EITC, the EIC is a refundable federal tax credit that helps working people achieve economic stability and security. It reduces the impact of the payroll and income taxes they pay and supplements the earnings of very low-wage workers (Center on Budget and Policy Priorities). Maryland’s EIC has proven to be a vital and effective resource for moving working families in the state towards economic success. According to the latest census figures, over 9% over Marylanders were living at or below the federal poverty threshold. The federal poverty level for a family of three was $18,310 in 2010. Each of these families could possibly qualify for $5,738 in federal and state EITC refunds, raising their annual income by over 30% (Maryland CASH Campaign).
Evidence shows that many people use their EITC refunds to make investments that enhance economic security and promote economic opportunity, such as paying off debt and investing in education*. Furthermore, extensive studies have shown that EITCs encourage families to obtain jobs and remain employed* and stimulate the local economy**. Unfortunately, many eligible Marylanders do not claim the benefit, often because they are not aware that they are eligible. It is estimated that 20 to 25 percent of eligible Marylanders are not claiming EITC and EIC benefits, leaving an estimated $110 million or more of state and federal money unclaimed (Maryland CASH Campaign). Requiring employers to provide information on the EIC and EITC, pursuant to the EIC Information Act, is a strong step in ensuring that more Marylanders have access to this important and effective resource.
The EIC Information Act was widely supported by anti-poverty groups throughout Maryland. Maryland Hunger Solutions’ Director Cathy Demeroto testified in support of the Act (pdf).
*“State Earned Income Tax Credits,” Center on Budget and Policy Priorities, January 2011.
**“Using the Earned Income Tax Credit to Stimulate Local Economies,” The Brookings Institution, November 2006.