Lifting families from poverty to the middle class is a universal priority, a transition that requires the best in public and private sector engagement. Too many poverty programs suffer the unintended consequences of perverse incentives and economic deterrents that need to be overcome in order to bridge the structural and behavioral chasm between public assistance and self reliance.
How to incentivize work, thrift, and opportunity was a question that Nobel Prize-winning economist Milton Friedman worked on for most of his life, particularly as he studied how to provide a financial safety net that could stay in place while individuals and families moved from dire economic circumstances to more abundant means. Under welfare programs alone, any improvement in a family’s financial situation would result in an elimination of public assistance, often long before economic independence can be achieved.
Friedman’s Earned Income Tax Credit (EITC), which was embraced by President Gerald Ford and expanded under Ronald Reagan, changed all of that by addressing disincentives – allowing workers to receive money back from the government depending on income level, size of family, and filing status. The EITC proved itself a success so much so at the federal level that 30 states have adopted matching programs, and now Rep. Mike Winder wants Utah to become the 31st. This is not the first attempt to create a state ETIC match in Utah, but it is particularly important now as more Utah families are struggling under the burden of high-inflation while the state is experiencing historic tax revenue and a large budget surplus.
EITC matching in Utah will put the surplus to work strengthening individuals and families and laying a foundation for continued economic growth. It will incentivize a return to work, addressing the labor shortage currently undermining businesses across the state. As Rep. Winder said in introducing the measure, “There is no public policy with a better record of drawing potential workers into the workforce than EITC. Research at the American Enterprise Institute recently revealed that there is ‘robust evidence that EITC expansions increase the extensive margin of labor supply.’”
Thanks to Rep. Winder’s leadership, language to create the Utah Earned Income Tax Credit is now included in S.B. 59 Tax Amendments and would make this credit equal to 15% of the federal amount. This is a triple win scenario for lower wage workers, businesses and a community at large trying to build a prosperous society.
Additionally, the EITC is in line with the Salt Lake Chamber’s broader efforts on social impact. Utah Community Builders, the Chamber’s nonprofit social impact foundation, is launching a new upward mobility initiative called the Opportunity Coalition. This effort will, among other things, identify barriers to work that confront too many Utahns. The only way for an anti-poverty program to be truly successful in the long-term is through a work-centered approach. This is at the core of Utah Community Builders’ Opportunity Coalition, and it’s also at the core of the intent and design of the EITC.
Leveraging the private sector’s desperate need for workers, together with community partners’ ability to provide crucial wraparound supports for Utah families stuck in intergenerational poverty is key. This new momentum from the business community with the Opportunity Coalition will address both the workforce shortage in entry level positions, while supporting long-term upward mobility of fellow Utahns.
Derek Miller is the CEO and President of the Salt Lake Chamber