Earlier this year, on a TV broadcast, Mayor Jim Kenney said: “The only way out of poverty is education.”
That’s not exactly true. Money works, too. And of the programs that help people leave poverty, the federal earned income tax credit (EITC) that puts dollars into the pockets of low-income workers is widely accepted as one of the more successful ways to combat poverty.
The program gives a federal tax credit for low- and moderate-income working people earning under $41,000-56,000 (depending on number of children and marital status). In 2018, the average credit was $3,191 for a family with children ($298 for a family without children).
That money makes a real difference and is widely credited with lifting millions out of poverty. That’s why an initiative from City Councilman Allan Domb to create a similar credit based on city wage taxes is a promising development. The bill, which would expand an existing but little-used program, passed Council unanimously and awaits Mayor Kenney’s signature.
It seems like a no-brainer. The intransigence of poverty has challenged and confounded city mayors for decades. Despite attempts, the 26% poverty rate of the city has barely budged and there are few quick solutions. Kenney himself has said the city must act faster. This bill would change things for people immediately by reimbursing them the city’s portion of the wage tax they paid (another portion of the tax goes to the Penn Intergovernmental Cooperation Authority). Domb estimates that a family of four earning $34,250 would get back $810 annually and that the program would impact 60,000 households.
That’s money that can make a real difference to families and get plowed back into the local economy.
The Kenney administration testified in Council against the program, citing concerns that the credit would include nonresidents who work in the city. Against the reality of low-income people in the suburbs shouldering the expense of commuting to their low-wage, highly taxed city jobs, that sounds like a whine.
The estimated annual cost of the program would be $25 million. That’s not nothing, but it is also likely to be mitigated by the very nature of the program. For example, a 2018 Inquirer report identified $13 million in annual spending by the city’s Office of Community Empowerment and Opportunity that addresses poverty over the last five years — with little to show for it. That’s on top of the overall high price we pay for poverty — in reduced health, reduced education, and reduced opportunities.
There are two other factors that should make this a no-brainer: The city is taxing people at one of the highest rates in the country. And the city budget has grown by $1 billion during the first term of the Kenney administration. The two are not unrelated.
This budget creep has been subject to little criticism or alarm; after all, times are good and the economy is booming. But just because revenues are healthy doesn’t mean spending should rise at the same rate. Bottom line: this $25 million annual investment that will directly impact families offers a more immediate return than most.