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Center on Budget and Policy Priorities:
In recent years, federal policies aimed at ensuring adequate income for working families have not kept up with inflation, leaving many working families struggling to make ends meet.
Other policies such as the federal Earned Income Tax Credit (EITC) have not been adjusted sufficiently to take up the slack.
The minimum wage is part of a long tradition of work regulations intended to protect workers from unfair and unsafe working conditions.
It helps the lowest-wage workers --- those least able to negotiate fair compensation on their own --- and its benefits accrue disproportionately to low-income families.
The income limits and benefit ceilings for the federal EITC are adjusted for inflation annually, but these adjustments do not compensate for the deterioration of the minimum wage.
The administrative cost of an EITC for a state is even lower than for the federal government, because the Internal Revenue Service does much of the work.
Another reason low-income families need income support is to make up for the large tax burdens they face in many states.
While the federal income tax exempts families living in poverty, low-income working families pay substantial amounts of state and local income taxes, general sales taxes, excise taxes, property taxes, and local wage taxes, among others.
According to the Institute on Taxation and Economic Policy, in 2002, the lowest-income 20 percent of households paid, on average, 11.4 percent of their incomes in state and local taxes, a higher share than any other income group.
State minimum wages and state Earned Income Tax Credits provide substantial benefits to working families when enacted separately, but they are especially valuable when both policies are in place.
Posted on December 1, 2006 07:43 AM
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