Enhance the earned income tax credit; create a child tax credit to support CT families, boost economy
Nearly four out of 10 Connecticut families struggle every month to make ends meet – to put food on the table, keep a car running, pay the rent, afford care for their small children while they work at the jobs available to them in our state. It is time for Connecticut to take action to help these families. The United Ways of Connecticut support restoration of the state earned income tax credit and creation a state child tax credit as do-able, high-impact steps to help our families – and boost our economy, at the same time.
The United Ways of Connecticut have worked for six years to make available reliable and realistic data on what it costs to live in Connecticut. This project is called ALICE – a study of families who are Asset-Limited, Income-Constrained, and Employed. The 2020 ALICE report for Connecticut reflects the following: 38% of households – about half a million families in our state – were struggling to make ends meet before the COVID public health emergency. As of 2020, it cost more than $90,000 a year for a family of four with one infant and one toddler to just afford their basic needs. 57% of our state’s Black households, 63% of Hispanic households, and 73% of single female headed households with children live at or below this ALICE threshold.
For these families, every hour of every day is consumed by the stress and worry of how to keep food on the table, pay the rent, buy the new shoes a child needs, or afford the high cost of needed medications. Sustained stress not only dramatically impacts health and health outcomes, research shows that child poverty is also associated with dire health outcomes.
Americans take real pride in the fact that our national history is marked by great periods of progress and success in reducing poverty and increasing opportunity. But the last two generations’ of developments across our country leave us with conditions that lean the opposite direction.
Manufacturing – once the engine of the U.S. economy and the source of secure, well-paid jobs for so many Americans – has faltered. In 1960, about one in four American workers held a job in manufacturing; today, that number is fewer than 1 in 10. This trend has greatly impacted Connecticut: according to the Department of Labor, 152,200 Connecticut workers were employed in manufacturing as of February 2021– roughly half the number as in 1990 (307,000).
The great majority of people in our country work now – or did work before COVID – in retail. About 350,000 Connecticut residents worked in retail jobs in 2020 before COVID, according to the National Retail Federation. Over the past two decades, many major retailers went from a workforce of 70 to 80 percent full-time to at least 70 percent part-time. A single mother working at a coffee shop might be scheduled for four hours’ work in the morning, to work only when traffic is heaviest, rather than a full eight-hour shift. This amounts to savings on labor costs for her employer. But she cannot make ends meet with four hours’ earnings a day.
At the same time, even for those jobs that remain full-time – or close to it – wages have not kept up with the cost of living.
The Pew Research Center tells us that average hourly wages peaked in America more than 45 years ago. The $4-an-hour average national pay rate in January 1973 bought then what $23.68 would buy today, a salary equivalent of $49,250 per year. The median hourly wage of an American worker now is $19.33 per hour. This means the average worker has lost almost $10,000 of annual purchasing power in comparison with 1973. That’s $10,000 less every year to pay the rent, keep the lights on and the furnace burning, put food on the table, or save for a child’s college. It is no wonder that, as the Federal Reserve has shown, 40% of Americans do not have $400 in savings today that they can draw on in the event of a crisis.
In Connecticut, the typical worker hasn’t seen a real (inflation-adjusted) raise for the last two decades. This means the typical worker in our state has experienced an hourly wage decrease in the past 20 years. And, again here, equity concerns rise in sharp relief: for the median Black worker in Connecticut, the hourly wage is $14.85 and the hourly wage for the median Hispanic worker is $15.67.
The United Ways of Connecticut believe that we can and we must take concrete steps to start addressing these inequalities and help families across our state to meet their needs. First and foremost, we support restoration of the state’s earned income tax credit to at least 30% of the federal EITC and introduction of a state-level child tax credit.
These two steps forward, together, would help to address the core, pressing need of 38% of Connecticut families: a lack of income to afford the basics. Putting money into the pockets of these families can allow them to escape the daily stress and trauma of simply not having enough income to support their family. And putting money in the wallets of these Connecticut residents will boost the economy. Research by Moody’s shows that for every dollar of EITC a family earns, they return $1.24 to the economy; for every dollar of CTC, they return $1.38. This spending would then provide income for other families in the state, who in turn would increase their own spending creating a virtuous cycle throughout the state’s economy.
It’s time to take these steps to help Connecticut’s struggling families and make a sound investment that will pay dividends for years to come.
Lisa Tepper Bates is President and CEO of the United Way of Connecticut. Donna Osuch is Chair of The United Ways of Connecticut Council of Chief Professional Officers.
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