SPRINGFIELD – As Labor Day approaches, two new state laws will make life a little easier for the lowest-income working families in Illinois.
"Americans honor work, yet too often, we fail to reward it," said Jerry Stermer, president of Voices For Illinois Children.
Gov. Rod Blagojevich recently approved an increase in the minimum wage from $5.15 an hour to $5.50 an hour starting Jan. 1, 2004, and up to $6.50 an hour beginning the following January.
While many lawmakers and business groups opposed that increase, another less-controversial proposal passed the House and Senate unanimously this spring and won approval from the governor last week.
That legislation, Senate Bill 4, makes permanent a state tax credit for low-income workers that would have otherwise lapsed, and extends it to benefit an additional 150,000 to 200,000 families.
Illinois first established the credit in 2000, but it was set to expire automatically after just a few years.
"We saw that it did work, and being successful, we wanted to do more this year," said state Rep. Patricia Reid Lindner, R-Aurora.
The new law makes Illinois' earned income tax credit both permanent and refundable, which means if the credit is larger than the tax bill, the worker will receive a refund equal to the difference.
The federal government has always offered that refund, but state law previously did not allow it.
"That credit will now help the poorest of Illinois' poor working families," said House Minority Leader Barbara Flynn Currie, D-Chicago, who was chief sponsor of the bill in the House.
To qualify, a person must have earned income from working and must meet or fall below the income levels set by the federal government. For a single person with no children, that limit was $11,060 for tax year 2002. For a married couple with more than one child, the limit was $34,178. The amount of the credit is figured on a sliding scale provided by the Internal Revenue Service.
The state earned income tax credit is equal to 5 percent of the amount of the federal earned income tax credit.
Currie said she hopes to pass legislation eventually to boost the state credit to 20 percent of the federal amount, but said even the 5 percent can be a help.
A new study by the Illinois Make Work Pay Coalition shows that, for example, a single parent with two children earning the current minimum wage would make $10,700. The parent's state taxes would ordinarily be $141, but with the earned income tax credit, the parent will now be able to receive a refund of $66.
That $207 can really make a difference for families struggling to make ends meet, and helps offset the amounts that sales, property and payroll taxes cut out of their take-home pay, said David Marzhal, executive director of the Center for Economic Progress.
"One real benefit of the Illinois EITC is that it will stimulate the economy," said Ralph Martire, executive director for the Center for Budget and Tax Accountability. "It puts money back in the pockets of low-income working families – folks who will most likely spend it in our local communities, helping boost the economy, or use the money to start building assets and moving out of poverty."
But Marzhal warned that families cannot benefit from the credit unless they file a tax return to claim it, and suggested they seek out free tax preparation help available in their communities.
Approximately 20 percent of families eligible for the federal earned income credit did not receive it because they had not filed the proper paperwork, Marzhal said, and he estimated that that percentage also applies to Illinois' earned income credit.
You can reach Kate Clements at (217) 782-2486 or via e-mail at firstname.lastname@example.org.