Employment and Barriers to Independence
Poverty and Economic
Well Being
Duncan's Plan is a Strong Step
to Help Low-Wage Earners
The plight of low-wage workers is receiving considerable attention in Montgomery County. The latest response is a proposal by County Executive Douglas Duncan to create a local Earned Income Credit -- a program that uses the tax code to boost the incomes of low-wage workers.
Attention to the working poor is a welcome addition to the policy debate in the county. Everyone knows that Montgomery County is one of the richest jurisdictions in the nation. Average household income in the county is more than $115,000 per year, according to county planners. This ranks Montgomery County seventh-highest among the nation's 3,000-plus counties.
However, not everyone is sharing in the county's abundant prosperity. More than one in thirteen kids live in families with income below poverty. Many county residents may not be aware of this deprivation, but it isn't difficult to envision when thinking about some of the jobs in our community. Just how do families make ends meet when the wage earners are cleaning office buildings, working at retail outlets and restaurants, providing child care or mowing lawns? How do they afford rent, health care, car insurance, or even modest expenses like after-school sports and other activities for their children? A report published last year by the Maryland Budget and Tax Policy Institute showed that thousands of families in Maryland were unable to move out of poverty despite having at least one adult who worked full-time, full-year.
If working families can't make ends meet, then the next question is: what can be done about it?
There is no shortage of good ideas to help low-income workers. An Earned Income Credit has been shown to be one of the best.
Nationally, the federal Earned Income Credit lifts more than four and a half million people out of poverty each year. Among government policies, only social security raises more people above poverty. Under the program, low-income workers can receive a tax credit of up to 40 cents for every dollar earned. If the credit is greater than the income taxes owed, the family receives a refund check up to a maximum of $3,821, though the refunds received by the majority of families are much smaller.
The state offers a similar, though much less generous program. Thus, the anti-poverty effectiveness of the state earned income credit is much more limited. In 1999, the maximum benefit in Maryland is about $380, and the credit phases out quickly so that families at the poverty level receive little or no benefit. The state credit is scheduled to become slightly more generous over time, eventually providing a modest benefit to those with poverty-level incomes.
When fully-phased in, the state credit in combination with the proposed county benefit would provide low-income families with children a more meaningful income boost. By 2001, Mr. Duncan's proposal to match the state program with county funds would provide a combined state and county credit of nearly $1,150 for a family of four with a full-time, minimum wage worker. The combined credit would be about $400 for a family of four at the poverty level. Admittedly, that's not enough to solve financial problems, but it helps.
Mr. Duncan announced that in addition to his proposed initiatives, he supported an increase in the federal minimum wage, and that he would lobby state policymakers to enact policies that reward work. He called for an increase in the state earned income credit and for extension of health coverage to low-income adults. This call for action to address the needs of the working poor is commendable. Montgomery County's substantial political clout can have a major impact on state policy decisions affecting the poor.
All told, the federal, state, and county initiatives mentioned by Mr. Duncan underscore an important point: people who work full-time ought to be able to make ends meet.
Fighting poverty and helping low-income families requires a multifaceted approach. Mr. Duncan's proposal to create a county earned income credit is not the Holy Grail of social policy. Some may question whether his initiatives go far enough. However, there is no dispute that an increased Earned Income Credit, combined with higher wages and the provision of essential services, is a significant step in the right direction.
Note:
A version of this article was published in the Montgomery Journal on July 20, 1999.