A recent report showcases the fact that the average amount of money that Vermont households reap from the Earned Income Tax Credit (EITC) isn’t leaps and bounds above what residents in other states receive. In fact, Vermont falls squarely in the middle of the pack — in 2011, it ranked 25th in terms of the total credit — federal and state combined — that households received.
But Vermont Tax Department officials have rebuked the report, calling it a deceptive way to portray the data.
“This unfairly clouds the debate about how best to use the money we spend on anti-poverty programs,” said Michael Costa, policy director for the Department of Taxes.
The Public Assets Institute (PAI), a nonpartisan organization that analyzes state budget and tax policies, released the report on April 10.
It’s meant to debunk one of the Shumlin administration’s central arguments for slashing the state portion of the EITC — that Vermont is more generous than most when it comes to doling out this credit.
The EITC, which benefits low-income working households, is considered a highly effective anti-poverty tool. Vermont supplements the federal EITC by matching 32 percent of the credit. Shumlin officials, amidst a campaign to reduce the state credit, often point to the fact that only one state offers a higher matching grant.
Gov. Peter Shumlin initially proposed to reduce the state credit by two-thirds and reallocate roughly $17 million to step up funding for the state’s child-care subsidy program. In response to rigid opposition in the Legislature — the House rejected it outright; the Senate hasn’t voted on a revenue package yet, but it’s reacted with similar skepticism — he recently scaled back the proposal by $5 million.
PAI ranked all 50 states in terms of the average state and federal credit that residents receive, and the chart shows Vermont smack in the middle. The report also reveals that Vermonters received the smallest average federal credit in 2011.
But Costa says that by lumping the two credits together, PAI obscures how much the state pitches in, which makes the rankings an inaccurate barometer of a state’s “generosity.” For instance, Tennessee and Arizona, which finish just ahead of Vermont in the rankings, don’t even offer a state credit.
Costa told VTDigger, “No matter what one feels about the administration proposal, the Public Assets Institute’s fact sheet is a disappointingly misleading document.”
The reason low-income Vermonters aren’t bringing in bigger checks, Costa explained, is a function of how the federal government doles out the credit — the lower a household’s income and the more dependents it has, the higher the credit it will receive.
“The fact that the combination of Vermont’s relatively higher income levels and lower dependent levels results in a smaller federal EITC does not negate the fact we have one of the most generous supplements in the country,” Costa said.
But Jack Hoffman, a senior policy analyst for Public Assets Institute, says it’s important to show how the average credit — state and federal — in Vermont stacks up against those in other states.
“We wanted to provide some perspective on how much the average EITC credit in Vermont is compared to other states,” he said. “The administration has been talking about the EITC as a combined number. There was some new information out, and we thought it would be helpful to see how the Vermont EITC, state and federal, stacks up against other states, state and federal.”
About 45,000 Vermont households benefit from the credit each year; in 2011, the average amount they received (combined federal and state) was $2,367.
Hoffman said the report looks at the federal credit alongside the state credit, in part, because Shumlin officials frequently talk about the two in tandem and take pains to point out that their proposal wouldn’t impact the federal credit.
