Testimony to the Montgomery County Council
By Deborah Stein
Vice President for Policy
The Hatcher Group
July 9, 2013
Good Afternoon, Council President Navarro and Council Members.
Thank you very much, Councilmember Riemer, for inviting me to speak today.
My name is Deborah Stein, and I’m the vice president for policy at The Hatcher Group, a public
affairs firm based here in Montgomery County. I manage Tax Credits For Working Families1, a
national initiative designed to support policymakers and advocates working on four tax credits
for working families, including the federal, state and local Earned Income Tax Credit.2 I’m here
1
Tax Credits for Working Families includes a website, www.taxcreditsforworkingfamilies.org, which provides a
clearing house of information and research on four tax credits, the Earned Income Tax Credit, the Child Tax Credit,
the Child and Dependent Care Tax Credit, and property tax circuit breakers. We also provide technical assistance to
policy makers and advocates seeking to create, expand or defend these credits. In addition to my work on this
initiative, I have also worked on a number of issues related to budget and tax policy for children and families, and a
wide range of policy issues affecting children and families generally and particularly poor children. Before I joined
The Hatcher Group, I spent nearly a decade at Voices for America’s Children, where I led the policy support for
state child advocates around the country and started their federal policy program.
2
The federal EITC, and therefore the state and county EITCs, are available to families meeting the following income
criteria.
In 2013 Tax Year Earned Income and adjusted gross income (AGI) must each be less than:
 $46,227 ($51,567 married filing jointly) with three or more qualifying children
 $43,038 ($48.378 married filing jointly) with two qualifying children
 $37,870 ($43,210 married filing jointly) with one qualifying child
 $14,340 ($19,680 married filing jointly) with no qualifying children
http://www.irs.gov/Individuals/Preview-of-2012-EITC-Income-Limits,-Maximum-Credit--Amounts-and-Tax-LawUpdates
However, families with incomes near these limits receive very little. Once family income reaches the following
levels, the value of the credit begins to phase out:
 $17,500 for heads of household with one, two or three children;
 $7,959 for single people with no children;
 $22.850 for married couples with one, two or three children
 $13,310 for married couples with no children.
http://www.taxpolicycenter.org/taxfacts/Content/PDF/historical_eitc_parameters.pdf
The maximum credit for Tax Year 2013 is:
 $6,044 with three or more qualifying children
today to draw your attention to the invaluable benefits of the Earned Income Tax Credit,
including new research findings that show how the credit benefits both parents and children
long after they stop claiming the credit. Expedited Bill 8-13 would raise the level of the County
Working Families Income Supplement, which increases the value of the federal and state EITC
and thus amplifies the benefits I’m about to discuss.
The Earned Income Tax Credit is one of the most effective anti-poverty programs in the nation.
In 2011, the federal EITC prevented 5.7 million people, including 3.1 million children, from living
in poverty3 just by counting the additional income it provides. It lifts more people out of
poverty when we take into account that the EITC helps people work more and earn more.
The EITC is only available to people who work, and it has been proven to promote work,
particularly among single mothers and female heads of households.4 The credit helps them
move into the work force and helps them work more hours once they are in the work force. In
fact, the role of the EITC in helping working single parents is so large that the EITC expansions of
the 1980s and 1990s contributed more to the large increases in work among single mothers
and female heads of households in that period than the welfare reforms enacted at that time.5
The EITC is also valuable because it helps women move from low-wage jobs into better jobs,
and this is particularly true for women with low education.6 The EITC encourages work for
women so much that it boosts the size of the Social Security retirement benefits they ultimately



3
$5,372 with two qualifying children
$3,250 with one qualifying child
$487 with no qualifying children
http://www.census.gov/newsroom/releases/pdf/20120912_ip_%20slides_noplotpoints.pdf
Here in Montgomery County, the latest American Community Survey data from the Census Bureau indicates that
we have more than 26,000 women and children living in households headed by women. Single fathers are a rapidly
growing population—in 2011 8 percent of all households with children were headed by single fathers, up from 1
percent in 1960. http://www.pewsocialtrends.org/2013/07/02/the-rise-of-single-fathers/ The EITC is also likely to
benefit them, but this research was conducted when they were not a large enough share of the population to
measure the benefits.
5
For a summary of research on the EITC, see V. Joseph Hotz and John Karl Scholz, “The Earned Income Tax Credit,”
in Robert A. Moffitt, ed., Means-Tested Transfer Programs in the United States (Chicago: The University of Chicago
Press, 2003); Bruce Meyer, “The Effects of the Earned Income Tax Credit and Recent Reforms,” in Jeffrey R. Brown,
ed., NBER Book Series Tax Policy and the Economy (National Bureau of Economic Research, 2010),
http://www.nber.org/chapters/c11973; Bruce D. Meyer and Dan T. Rosenbaum, “Making Single Mothers Work:
Recent Tax and Welfare Policy and its Effects,” in Bruce D. Meyer and Douglas Holtz-Eakin, eds., Making Work Pay:
The Earned Income Tax Credit and Its Impact on America’s Families (New York: Russell Sage Foundation, 2001) and
Bruce D. Meyer and Dan T. Rosenbaum, “Welfare, The Earned Income Tax Credit, and the Labor Supply of Single
Mothers,” Quarterly Journal of Economics 116(3): 1063-2014.
6
Nada Eissa and Jeffrey B. Liebman, “Labor Supply Response to the Earned Income Tax Credit,” Quarterly Journal
of Economics (May 1996). Molly Dahl, Thomas DeLeire, and Jonathan A. Schwabish, “Stepping Stone or Dead
End? The Effect of the EITC on Earnings Growth,” Institute for the Study of Labor, revised April
2009, http://ftp.iza.org/dp4146.pdf
4
will receive.7 In addition, the research shows that by boosting the employment of single
mothers, the EITC reduces the number of female-headed households receiving cash welfare
assistance.
We have recently begun to learn that the EITC has important benefits beyond the strictly
financial. New research8 shows that the EITC improves the health of infants,9 contributes to
children's success at school10, and children who benefit from the EITC early in their lives are
more likely to go to college, and work more and earn more as adults. Infants whose mothers
receive the EITC were healthier, and the larger the amount of the EITC credit, the healthier the
infant was, measured by indicators such as birth weight and premature births. A number of
studies have shown the benefit of increases in income from programs such as the EITC on
children’s academic success; a recent review of the studies found that a credit worth about
$3,000 to a working parent during a child’s early years may boost that child’s achievement by
the equivalent of about two extra months of schooling. Young children in families that receive
the EITC have an increased likelihood of attending college and earning more as adults: one
study calculates that each dollar of income through tax credits may increase the real value of a
child’s future earnings by more than one dollar.11
7
Molly Dahl, Jonathan Schwabish, Thomas DeLeire, and Timothy Smeeding, “The Earned Income Tax Credit and
Expected Social Security Retirement Benefits Among Low-Income Women,” Congressional Budget Office, revised
March 5, 2012, http://www.cbo.gov/publication/43033.
8
The Center on Budget has provided a very helpful summary of the benefits discussed here. Earned Income Tax
Credit Promotes Work, Encourages Children’s Success at School, Research Finds For Children, Research Indicates
that Work, Income, and Health Benefits Extend Into Adulthood By Chuck Marr, Jimmy Charite, and Chye-Ching
Huang Revised April 9, 2013, http://www.cbpp.org/cms/index.cfm?fa=view&id=3793
9
Hilary W. Hoynes, Douglas L. Miller, and David Simon, “The EITC: Linking Income to Real Health Outcomes,”
University of California Davis Center for Poverty Research, Policy Brief, 2013, http://poverty.ucdavis.edu/researchpaper/policy-brief-linking-eitc-income-real-health-outcomes. Hilary W. Hoynes, Douglas L. Miller, and David Simon,
“Income, The Earned Income Tax Credit, and Infant Health,” NBER Working Paper No. 18206, July
2012, http://www.nber.org/papers/w18206. It looks like these outcomes are due, at least in part, to pregnant
mothers who receive the EITC getting more prenatal care and smoking less, but more research is needed. There is
also some evidence that state EITCs helps parents move into jobs with private insurance, and that as a result
children are more likely to be healthy, go to the doctor more, and are less likely to be obese. The Effects of State
EITC Expansion on Children’s Health, Reagan A. Baughman, Spring 2012,
http://www.carseyinstitute.unh.edu/publications/IB-Baughman-EITC-Child-Health.pdf.
10
For a discussion of the research on the impact of early childhood poverty, see Greg J. Duncan and Katherine
Magnuson, “The Long Reach of Early Childhood Poverty,” Pathways, Winter 2011, pp. 2227,http://www.stanford.edu/group/scspi/_media/pdf/pathways/winter_2011/PathwaysWinter11_Duncan.pdf;
see also Raj Chetty, John N. Friedman, and Jonah Rockoff, “New Evidence on the Long-Term Impacts of Tax
Credits,” Statistics of Income Paper Series, November 2011, http://www.irs.gov/pub/irssoi/11rpchettyfriedmanrockoff.pdf and Gordon Dahl and Lance Lochner, “The Impact Of Family Income On Child
Achievement: Evidence From The Earned Income Tax Credit,” American Economic Review (2012), pp. 19271956, http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.5.1927.
11
Chetty, Friedman, and Rockoff 2011.
It’s worth noting that in most cases these benefits occur even though the family claims the EITC
for only a brief period. The majority of EITC recipients, over 60 percent, receive the credit for
only one or two years12.
Montgomery County's increased EITC will benefit nearly 39,000 residents in 2014. Improving
this credit will not only help struggling working families make ends meet, it will also improve
infant health, enhance children’s education, and help them grow up to be more productive
members of society. It will help make sure that people who work hard are able to meet basic
needs, support their families, and stay off welfare. It is a small investment that can make a big
difference in the lives of working families.