Would A Statewide Earned Income Tax Credit Be Good For N.H.?

May 17, 2012 | 6:24 PM

By Emily Corwin

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In 1974 — the middle of an economic recession — President Ford introduced the Tax Reduction of 1975, hoping that tax cuts would stimulate the economy. The Earned Income Tax Credit (EITC) became federal law the following year, and has grown since. By last year, a family with two children who earned under $40,964 was eligible for a federal tax credit of up to $5,112. Back in the 1980s, states began to add their own EITCs to supplement the federal program. By 2009, 24 states had a statewide EITC. Since New Hampshire doesn’t have a state income tax, it’s natural to assume the state wouldn’t have an EITC, and it doesn’t. But that hasn’t stopped the state of Washington, whose new EITC goes into effect this year.

This past Tuesday the University of New Hampshire’s Carsey Institute issued a brief about the impact of statewide EITCs on children of eligible families. It turns out the effects are substantial — and sometimes counter-intuitive. According to the Carsey Institute, statewide EITC programs are associated with:

• Improved reports from mothers regarding their children’s health status
• Lower rates of public health insurance coverage and greater rates of private health insurance among children
• Lower obesity rates among children in nonmetropolitan regions
• Higher medical care use in metropolitan regions
• Possible improved cognitive outcomes due to increased employment among low-income mothers

Here’s the counter-intuitive part: the Carsey Institute’s researcher, Reagan Baughman, found an unexpected correlation between access to an EITC, and increased obesity rates. She suggests this might be attributed to increased affordability of convenience foods, along with newly employed mothers having less time to cook meals at home. But other than that, the outcomes listed in the Carsey report look pretty promising. So why isn’t NH grabbing a piece of this pie? Afterall, there are 76,000 families (that’s 1 in 6 people) in New Hampshire who would be eligible for an EITC, were it available. Jeff McLynch at the New Hampshire Fiscal Policy Institute says this:

“To have a state-based EITC, what you need in place is two things: an administrative structure for people to apply and to distribute the credits, and the resources to fund the program. Given the fiscal difficulties the state faces, we don’t have either of those things in place right now in New Hampshire.”

McLynch does mention that there is one similar tax relief program for low-income Granite Staters. This is the Low & Moderate Income Homeowner’s Property Tax Relief Program, which offers rebates to eligible property owners who apply for it. McLynch says a few changes would need to be made to get the kind of results that the Carsey Institute is attributing to statewide EITCs. These include extending tax relief to low-income renters who absorb property taxes through rent payments; and extending relief to include municipal property taxes. One major speed bump in New Hampshire, however, is public awareness. If eligible taxpayers don’t know to apply for property tax relief programs, the programs won’t be effective. And while Massachusetts has started some publicity campaigns around their low-income relief programs, New Hampshire has not.