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Oklahoma Undercuts Working Families

May 20, 2016 at 2:15 PM

Oklahoma lawmakers have voted to cut the state’s Earned Income Tax Credit (EITC) by more than 70 percent, hitting 200,000 low-income working households, many of whom will lose the credit altogether.  The cut will raise just $29 million to help close a gaping $1.3 billion shortfall — which was largely caused by years of income tax rate cuts that mainly benefit high-income households and tax breaks for the oil and gas industry, followed by a steep decline in energy prices. 

If Oklahoma wants to build a stronger, more prosperous economy that works for everyone, cutting taxes for the wealthy and paying for it by slashing help for working families isn’t the way to do it. 

The EITC cut would limit the credit to what state income taxes a household owed rather than allowing the household to receive the full value of the credit it earned, even if that exceeds their tax liability.  Most state EITCs are refundable to help offset other taxes that working families pay and let those families keep more of what they earn.  Indeed, EITC-eligible families in Oklahoma pay 9-10 percent of their income in state and local taxes, mostly sales taxes.

Despite the giant budget shortfall, lawmakers didn’t reverse the state’s most recent cut in income tax rates, which took effect this year, or reconsider the tax breaks to oil and gas firms that cost $400 million in 2015 alone. Instead, while sharply cutting the EITC, they’re considering cutting Medicaid and other services for struggling families.

As we’ve explained, building broadly shared prosperity means helping struggling families participate more fully in the economy, not less.


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